Greenbook/Tealbook

Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. CONFIDENTIAL (FR) SECOND SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System January 14, 1970 SUPPLEMENTAL NOTES The Domestic Economy Industrial production. Industrial production in December was 170.9 per cent of the 1957-59 average, .3 per cent below November (revised to 171.4 from 171.1) and 1.3 per cent above a year earlier. Declines were concentrated in output of consumer durable goods, but materials production also eased off further, especially in the automotive supporting industries. (Confidential until released January 16). Retail sales. The year ended with no apparent change in the cautious buying pattern of consumers. Sales at all retail stores in December--despite some pick-up in the last 1-1/2 weeks were, at $29.6 billion (advance release), virtually unchanged from November and October. In real terms, December was the seventh month of sales below a year earlier. Unit auto sales, which fell from an annual rate of 8.3 million in November to 7.7 million in December, declined sharply further in the first 10 days of January when the weather was unusually bad. Inventories. The increase in the book value of retail inventories slowed sharply in November, as a result of a switch by automotive dealers from rapid buildup in October. For total manufacturing and trade, the November increase was less than half the October rate. - 2The Commerce Department has estimated that on a GNP basis nonfarm inventory accumulation in the fourth quarter as a whole was at a $7.6 billion annual rate, below the third quarter rate of $10.3 billion. The implied book value increase for the quarter was about the same as in the third quarter, but the valuation adjustment was higher. The fourth quarter figures imply a December book value increase above the reduced rate reported for November. CHANGE IN BOOK VALUE OF BUSINESS INVENTORIES Seasonally adjusted annual rate, billions of dollars Manufacturing and trade, total Manufacturing, total Durable Nondurable Trade, total Wholesale Retail Durable Automotive Nondurable 1969 October November QII QIII avg. avg. 11.5 13.9 18.2 8.3 7.6 8.0 8.5 5.4 6.0 1.6 6.2 1.8 7.2 1.3 5.8 -0.4 3.9 2.2 1.7 -0.7 0.2 2.4 5.9 0.4 5.5 2.9 2.8 2.6 9.7 2.9 6.8 5.8 5.0 1.0 2.9 1.0 1.9 0.5 -0.1 1.4 Retail inventory sales ratios increased slightly in November and as a result aggregate retail ratios were at or above late-1966 levels. - 3 INVENTORY-SALES RATIOS Manufacturing and trade, total Trade, total Wholesale Retail Durable Automotive Nondurable Gross national product. Oct. 1966 Nov. Dec. 1969 Oct. Nov. 1.51 1.54 1.56 1.54 1.55 1.36 1.17 1.48 2.07 1.62 1.20 1.38 1.21 1.49 2.10 1.68 1.20 1.39 1.22 1.51 2.10 1.67 1.23 1.39 1.18 1.53 2.20 1.80 1.22 1.39 1.18 1.54 2.23 1.82 1.23 (Confidential until release January 16). In the fourth quarter of last year, GNP rose by $10.3 billion, annual rate; in real terms GNP was unchanged from the third quarter. Final sales were up $13.3 billion, current prices, slightly less than the third quarter increase and inventory accumulation in the fourth quarter was $7.8 billion, annual rate, about $3 billion less than in the previous quarter. GNP prices rose by 4.4 per cent annual rate in the fourth quarter. -4GROSS NATIONAL PRODUCT AND RELATED ITEMS Billions of Dollars Seasonally Adjusted Annual Rate 1969 III IVp 1969- IVp Change From preceding Quarter Billion $ Per Cent ner year Gross National Product Final sales Private 942.8 932.0 715.0 953.1 945.3 726.4 10.3 11.4 4.4 5.7 6.4 Personal consumption expend. Durable goods Nondurable goods Services 579.8 89.8 245.1 244.9 589.2 89.6 249.4 250.2 9.4 -0.2 4.3 5.3 6.5 -0.9 7.0 8.7 Gross private domestic invest. 143.3 Residential construction' 31.4 Business fixed investment 101.1 Change in business inventories 10.7 Nonfarm 10.3 142.4 31.6 103.0 7.8 7.6 -0.9 0.2 1.9 -2.5 2.5 7.5 13.3 -2.9 -2.7 2.6 -0.1 Gov't purchases of goods & serv. 217.0 Federal 103.2 Defense 80.3 Other 22.9 State and local 113.8 218.9 102.7 79.2 23.5 116.2 1.9 -0.5 GNP in constant 1958 dollars GNP implicit deflator 730.6 129.0 730.5 130.5 -0.1 Personal income 756.5 766.9 10.4 Disposable income Saving rate (per cent) 639.0 6.7 647.1 6.4 8.1 Net exports of goods & services p/ Preliminary. -1.1 0.6 2.4 -- -- 3.5 -1.9 -5.5 10.5 8.4 -0.1 4.4 5.5 5.1 -5The Domestic Financial Situation Bank credit. Final data on bank credit for December indicate that the decline in total loans and investments at all commercial banks in December was slightly less than was estimated in the Total loans increased at a faster rate supplement of January 9. over the month than originally estimated and this more than offset a decline in holdings of municipal and Federal agency issues that was somewhat larger than previously estimated. The change in U.S. Treasury security holdings in December turned out to be the same as estimated in the January 9 supplement. The final December data revealed that business and security loan categories were slightly stronger than had been estimated earlier. Bank sources of funds. During the last week of December consumer-type time and savings deposits at weekly reporting banks increased approximately $300 million which is about $160 million less than the advance recorded in the final week of 1968. Preliminary data from eleven Federal Reserve Districts indicate that, as is customary, large banks lost a part of this increase during the first week of January. The outflow at banks in the eleven Districts was about $80 million which is about equal to the outflow recorded during this week last year at large banks in all Districts. -6Nonbank depositary intermediaries. Reinvestment period outflows from the nonbank depositary institutions were substantially larger than a year ago. At mutual savings banks net withdrawals were approximately 50 per cent larger than a year earlier and net withdrawals from S&Ls were nearly double a year earlier. In line with usual seasonal patterns, however, recent outflows were somewhat smaller than during the June-July 1969 period. DEPOSIT FLOWS DURING THE DECEMBER- JANUARY REINVESTMENT PERIOD (Millions of dollars, not seasonally adjusted) Mutual Savings Banks 1/ Savings and Loans Associations 2/ 1966 - 67 - 64 - 360 1967 - 68 -189 - 632 1968 - 69 -226 - 740 1969 - 70 -323 -1,344 -419 -1,459 Memo: June-July 1969 Reinvestment period 1/ 15 largest mutual savings banks in New York City, which account Data exclude interest for 29 per cent of industry deposits, credited. 2/ Universe estimates made by the FHLBB based on a sample of 480 associations. Data exclude dividends and interest credited. Mortgage market. In the latest FNMA auction, the implicit private market yield on FNMA 6-month forward purchase commitments continued to rise quite sharply as FNMA again received a massive volume of bids for its commitments based on the new 8-1/2 per cent FHA and VA rate ceiling. The extent of the rise in the FNMA yield -7 - in the last two auctions suggest that under the former ceiling rate of 7-1/2 per cent, the discount of nearly 10 points may have been the highest level at which originations could take place and that without this discount barrier, yields would have been even higher. Currently, the discount associated with the 6-month FNMA commitment is already over 5-1/2 points and with the strong demand for FNMA funds expected to continue, the average discount may soon approach the December levels. FNMA WEEKLY AUCTIONS Implicit private Amount of total offers Accepted Received (Millions of dollars) market yield on 6-month commitments (per cent) Average discount on 6-month commitments (Points) Highs 1968 1969 $232 (6/3) 410 (6/13) $ 89 (7/1) 152 (9/8) 7.71 (6.10) 8.87 (12/29) 8.1 (5/6) 9.6 (12/29) Dec. 1 8 15 22 29 236 243 229 307 269 121 123 122 122 128 8.58 8.64 8.70 8.78 8.87 7.6 8.1 8.6 9.0 9.6 Jan. 5 12 705 672 123 151 9.19 9.36 4.5 5.7 Note: Average secondary market yield after allowance for commitment fee, and required purchase and holding of FNMA stock, assuming prepayment period of 15 years for 30-year Government-underwritten mortgages. Yields shown are gross, before deduction of 50 basis point fee paid by investors to servicers. The first auction date was May 6, 1968. - 8 INTEREST RATES 1969 1 1970 Highs PrPmbPr Federal funds (weekly averages ) 5.95 (1/1) 9.61 (9/24) 8.75 (12/10) 8.45 (1/7) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highes quoted new issue Secondary market 6.00 6.40 (4/30) 6.00 9.05 (12/31) 6.00 8.75 6.00 9.00 5.96 6.50 6.25 6.32 8.09 8.75 8.88 8.58 7.93 8.75 8.88 8.45 (12/11) 7.60 8.88 8.75 8.44 (1/8) Tnws 1S January 13I Short-Term Rates 6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary 5.87 6.38 7.06 6.03 6.13 (4/30) 8.08 (12/29) 7.92 7.82 (2/17) 8.63 (12/15) 8.63 8.75 (1/22) 12.50 (6/10) 11.14 10.38 (3/28) 8.39 (11/20) 8.19 (12/11) 8.30 (1/8) (3/11) 8,25 (12/3) 8.00 8.25 (4/30) (2/17) (1/7) (1/16) (12/29) (12/15) (10/8) (11/20) 6.25 6.50 (1/30) 6.25 9.15 (12/31) 6.25 9.00 6.25 9.00 5.86 (1/16) 7.86 (11/24) 6.25 (12/11) 7.60 6.25 (12/11) 7,46 3.90 (1/2) 6.11 (1/20) 5.91 (6/5) 8.33 (12/29) 7.14 (12/29) 7.95 6.88 8.14 6.88 6.56 (1/2) 7.26 (2/3) 7.91 (12/31) 8.91 (12/31) 7.67 8.63 7.91 (1/9) 8.93 (1/9) 7.03 (1/23) 6.90 (2/20) 7.80 (6/29) 8.85 (12/5) 8.70 8.58 (1/8) Municipal Bond Buyer Index Moody's Aaa 4.82 (1/23) 4.57 (1/2) 6.90 (12/19) 6.57 (12/26) 6.88 (12/11) 6.61 (1/8) 6.48 (12/11) 6.41 (1/8) Mortgage--implicit yield in FNMA weekly auction 1/ 7.66 (1/6) 8.87 (12/29) 8.70 1-year Treasury bills (bid) Prime municipals 5.60 (1/8) Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa No call protection Call protection 1/ 9.36 (1/12) Yield on 6-month forward commitment after allowance for commitment fee and required purchase and holding of FNMA stock. Assumes discount on 30-year loan amortized over 15 years. 

Federal Reserve (1970, January 14). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19700115_part1

@misc{wtfs_greenbook_19700115_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1970},
  month = {Jan},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19700115_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}