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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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 optimal 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. CONFIDENTIAL (FR) CLASS II - FOMC October 13, 1978 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY ... .. . .... Retail sales .. Book value of wholesale trade inventories * . . . 1 3 TABLES: Retail Sales . . . . . . . . . . . . . . . Wholesale trade inventories . . . . . . . . . . . . 2 4 . 5 THE DOMESTIC FINANCIAL ECONOMY Money market certificates .... . .... . . TABLES: Estimated Money Market Certificate Inflows . . . Monetary Aggregates .. . . . . . ..... Interest Rates . . . . . . . * . . . . . . . . . ERRATA: . . . . . . . . . .. . . . 7 8 9 . . . 6 SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Retail sales are indicated to have increased 1.5 per cent in September, after rising 1.8 per cent in August (sharply upward revised from earlier estimate). Sales of stores of all major types of goods increased sharply over the August-September period. Total sales in the third quarter are reported to have been 1.9 per cent above those in the second quarter, slightly below the average of the quarterly increases in the first two quarters of the year, and appreciably less than in the second quarter. Third quarter sales of durable goods were 3.2 per cent above that in the second quarter, with those of the furniture, home furnishings, and equipment grouping of stores and at miscellaneous durable goods outlets particularly strong. Sales at nondurable goods stores in the third quarter were up 1.2 per cent from those in the preceding quarter. -2RETAIL SALES (Per cent change from previous period; based on seasonally adjusted data) QII QIII 1978 July Total sales 4.6 1.9 - .2 1.8 1.5 (Real) 2.0 n.a. - .6 1.3 n.a. Total, less auto and nonconsumption items 3.8 1.7 .4 .7 1.3 GAF 6.1 1.9 .1 1.9 1.4 Durable 7.2 3.2 - .7 4.2 2.1 Auto 6.8 1.4 -2.7 5.6 1.6 Furniture & appliances 5.9 2.5 .7 3.4 1.3 Nondurable 3.4 1.2 .1 .6 1.2 Apparel 6.3 3.7 2.1 4.2 .2 Food 3.3 1.4 .8 .1 1.6 General merchandise 5.8 1.0 - .9 .5 1.9 .1 -.6 -2.6 1.7 1.6 Gasoline 1/ Aug. Sept. Deflated by all commodities SA consumer price index. -3The book value of wholesale trade inventories declined in August at a seasonally adjusted annual rate of $1.5 billion, about the same as in July. The small book value reductions in July and August followed substantial increases earlier this year. Excluding raw farm products, these stocks increased at an annual rate of $0.7 billion in August and $12.9 billion in July. The July rate of wholesalers' accumulation of goods excluding raw farm products was a little above the second quarter rate. The August decline in inventories of all merchant wholesalers was accompanied by a moderate rise in sales (1.5 per cent) and, as a result, the ratio of inventories to sales declined to 1.17, somewhat below average but still above historical lows. Inventories held by durable goods wholesalers rose at an annual rate of $.6 billion in August,with a relatively large accumulation at wholesalers of machinery. had increased at a $9.2 billion rate. In July, durable goods stocks Wholesalers of nondurable goods reduced stocks at an annual rate of $2.1 billion in August, less than one-fifth the drop in July. In both months declines occurred in inventories of raw farm products--in August the decline was particularly large. -4- WHOLESALE TRADE INVENTORIES: CHANGE IN BOOK VALUE (Billions of dollars; seasonally adjusted, annual rate) 1977 QIII QII QIV QI 12.0 2.6 4.7 7.5 19.5 11.8 - 1.9 Durable 5.4 5.4 8.1 5.9 9.9 7.9 9.2 .6 Nondurable 6.6 -2.8 -3.4 1.6 9.7 3.9 -11.1 -2.1 -. 7 4.5 3.2 3.8 2.3 5.1 .7 QI Total Excluding farm 3.2 Farm 3.4 -2.9 .1 .7 -4.1 1978 July(r) QII -14.8 Aug.(p) -1.5 .1 -2.2 WHOLESALE TRADE INVENTORY/SALES RATIO QI Total Durable Nondurable r = revised. p = preliminary. QII 1977 QIII OIV QI QII 1978 July(r) Aug. (p) 1.24 1.21 1.24 1.23 1.27 1.20 1.19 1.17 1.77 1.76 1.78 1.73 1.76 1.69 1.66 1.66 .79 .79 .85 .79 .78 .75 .84 .79 -5- The Domestic Financial Economy Money market certificates continued to attract a sizable volume of funds in September (see T ble). Total flows into the new certificates during September equalled flows in August, though MSBs and commercial banks experienced a moderate reduction in certificate sales while S&Ls stepped up certificate issuance over the month.1/ As expected, 6-month certificate inflows in September were substan- tially weaker than in June and July, the first two months of money market certificate issuance. No additional information is available concerning the pro- portion of money market certificate flows representing new money. However, judging from September deposit flow data, it seems clear that the new certificate did indeed have a significant positive impact on thrift institution deposit growth in September. MSB and S&L combined deposit growth accelerated last month measured on an end-ofmonth basis. This 16.4 per cent seasonally adjusted annual rate of growth is the highest rate experienced since August of last year. 1/ S&L certificate flows include a small amount of interest credited. Interest on the money market certificates will be credited every 3 months by these institutions. Errata: Page II-6. Section on Residential Construction, line 4: "September" should be changed to read "August." Page IV -T-1: Table on U.S. International Transactions should be updated to read as follows: For 1978-Q2: Line 14 -- -5,100 17 -- 374 19 -- 489 21 -- 7,914 For 1978 - August: Line 4 -6b -- 14 -17 -19 -21 -- Page IV-9: 39 -535 1918 -322 590 43 Table on U.S. International Transactions Summary should be updated to read as follows: For 1970-Q2: Line 7 -2.7 For 1973 - August: Line 3 4 7 Page IV-12: 3.4 Section on Bank-reported private capital transactions, Line 2: "net inflow of $0.5 billion' should be changed to read "very small net inflow." ESTIMATED MONEY MARKET CERTIFICATE INFLOWS Money Market Certificates Outstanding as of the End Inflows ($ billions)1/: July __June ' August of August: Septmber $ billions Per cent of total 2/ deposits outstanding- Commercial Banks 2.1 3.4 2.3 1.9 9.7 2.4 S&Ls 4.9 6.0 3.1 4.0 18.0 4.3 MSBs 1.6 1.9 1.5 1.0 6.0 4.3 All Institutions 8.6 11.4 6.9 6.9 33.7 3.5 S&L 1/ Commercial bank and MCB certificate inflow through last Wednesday of month. certificate inflow through last day of month. 2/ Per cent of small-denomination time and savings deposits for commercial banks. -8MONETARY AGGREGATES (Seasonally adjusted)1/ Updated 1978 QI QII QIIiP July Aug. Sept. Sept. '77 to Sept. '78P Major monetary aggregates M-1 (currency plus demand 14.1 8.4 9.9 7.6 4.8 8.5 deposits) 6.2 2. M-2 (M-1 plus time & savings 12.5 8.5 7.9 8.9 8.0 10.4 deposits at CBs, other 6.9 than large CDs) 3. M-3 (M-2 plus all deposits at 7.7 7.8 10.0 9.3 11.8 13.7 9.4 thrift institutions) Bank time and savings deposits 4. Total 12.8 10.1 9.5 10.2 7.5 13.4 12.1 5. Other than large negotiable CDs at weekly reporting banks (interest bearing component of M-2) 7.3 6.4 9.9 10.3 11.5 11.4 8.5 9.7 2.5 1.3 -4.3 8.1 2.6 1.6 6. Savings deposits 8.7 3.0 2.5 -0.6 9.9 2.4 1.8 7. Individuals 2/ 8. Other 3/ 2.6 0.0 -15.5 -68.8 0.0 16.2 -4.5 14.0 13.1 17.2 22.5 14.2 11.4 10.5 Time deposits 9. 6.1 6.8 8.3 8.5 4.2 11.2 Small time 4/ 3.6 10. 11. Large time 4/ 26.9 17.3 32.7 47.5 31.3 16.4 30.1 2. Time and savings deposits sub- 3.0 3.8 4.3 1.2 6.4 10.3 4.0 ject to rate ceilings (6+10) Deposits at nonbank thrift institutions 5/ 13. Total 8.9 7.6 11.6 11.2 13.9 15.4 10.8 14. Savings and loan associations 9.0 7.9 12.8 12.8 15.6 17.5 11.6 15. Mutual savings banks 5.8 3.9 6.8 6.2 9.7 10.5 6.7 17.0 13.9 12.8 11.8 11.7 18.2 15.8 16. Credit unions Average monthly changes, billions of dollars 1. MEMORANDA: 17. Total U.S. Govt. deposits -1.2 18. Total large time deposits 6/ 4.6 19. Nondeposit sources of funds 7/ 1.7 1.1 2.8 0.7 1.5 3.1 1.4 2.9 4.5 0.0 0.7 1.5 2.1 0.8 3.2 2.0 0.4 4.0 1.3 p--preliminary. n.a.--not available. 1/ Quarterly growth rates are computed on a quarterly average basis. 2/ Savings deposits held by individuals and nonprofit organizations. 3/ Savings deposits of business, government, and others, not seasonally adjusted. 4/ Small time deposits are time deposits in denominations less than $100,000. Large time deposits are time deposits in denominations of $100,000 and above excluding negotiable CDs at weekly reporting banks. 5/ Growth rates computed from monthly levels based on average of current and preceding end-of-month data. 6/ All large time certificates, negotiable and nonnegotiable, at all CBs. 7/ Nondeposit borrowings of commercial banks from nonbank sources include Federal funds purchased and security RPs plus other liabilities for borrowed money(including borrowings from the Federal Reserve), Eurodollar borrowings, and loans sold, less interbank borrowings. INTEREST RATES (One day quotes--in per cent) 1978 Highs Lows Sept. 18 8.85(10/4) 6.58(1/11) 8.36(9/20) 8.71(10/11) 8.21(10/10) 6.09(4/24) 6.63(1/6) 10.00(10/10) 6.70(1/6) 7.00(2/8) 7.90 8.46 8.53 9.06 7.78 8.93(10/12) 9.10(10/12) 9.10 9.88 9.13(10/11) 6.65(1/4) 8.34(9/13) 9.13(10/11) 8.42(10/11) 8.99(10/12) 6.43(1/4) 6.66(1/5) 8.01 8.49 8.35 8.99 9.50(10/11) 6.85(1/4) 8.63(9/13) 9.50(10/11) 8.29(10/11) 6.53(1/4) 8.02 8.26 9.00(10/11) 4.60(10/6) 7.05(1/4) 8.63(9/13) 4.50(9/15) 9.00(10/11) 8.38 8.40 8.40 8.47 8.49 8.60 8.64 9.38 8.86(10/11) Oct. 12 Short-Term Rates Federal funds (wkly. avg.) 3-month Treasury bills=(bid) Comm. paper (90-119 days) Bankers' acceptances Euro-dollars CDs (NYC) 90 days Most often quoted new 6-month Treasury bills (bid) Comm. paper (4-6 mos.) CDs (NYC) 180 days Most often quoted new 1-year Treasury bills (bid) CDs (NYC) Most often quoted new Prime municipal note 3.55(3/3) 8.93 4.60(10/6) Intermediate- and Long-Term Treasury (constant maturity) 3-year 7-year 20-year Corporate Seasoned Aaa Baa Aaa Utility New Issue Recently offered Municipal Bond Buyer index Mortgage--average yields in FNMA auction 8.60(7/25) ~68.60(7/25) 8.73(7/13) 7.38(1/4) 7.71(1/5) 8.00(1/5) 8.92(7/12) 9.64(6/5) 9.18(7/7) 9.22(7/14) 8.28(1/3) 8.61(3/24) 8.48(1/6) 8.74(9/15) 9.53(10/11) 9.04(10/6) 8.73(9/15) 9.04 6.32(7/13) 5.58(3/16) 6.02(9/14) 6.10 9.13(1/9) 9.79 9.91(10/2) 10.02(7/10) 9.09(1/3) 

Federal Reserve (1978, October 16). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19781017_part1

@misc{wtfs_greenbook_19781017_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1978},
  month = {Oct},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19781017_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}