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. November 17, 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 Total Personal Income . . . . . . Book value of retail trade inventories . . . . . . * * * * * * * TABLES: Personal Income . ... . . * 4 Business Inventories . . . . * 0 4 Inventory/Sales Ratios . . . * 0 4 S THE DOMESTIC FINANCIAL ECONOMY TABLES: Monetary Aggregates . . . Interest Rates . . . REVISIONS 0 0 * * 0 & . . .... 0 0 & . * * S 5 0 6 5 * 0 * 6 S 0 0 # 0 0 0 a * 5 0 *0 APPENDIX: Savings Accounts Subject to Automatic Transfers .. A-1 TABLES: Savings Deposits Authorized for Automatic Transfer . . . A-3 SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Total personal income increased $21.3 billion in October to a seasonally adjusted annual rate of $1,764.2 billion. The October rise was substantially more than in the two preceding months, but in the third quarter as a whole the income gains had averaged $15-3/4 billion. wages and salaries rose sharply in October, employment and earnings. Private reflecting large increases in In addition, Government wages and salaries rose sharply, with $2-1/3 billion of the rise due to the 5-1/2 per cent pay raise for Federal civilian and military personnel. (Table follows). The book value of retail trade inventories declined at a seasonally adjusted annual rate of $1.0 billion in September, following increases in two preceding months at annual rates averaging $12.8 billion in each month. Liquidation was widespread by type of store in September, but stocks at general merchandise stores were accumulated at a $4.2 billion annual rate. Over the third quarter, retailers accumulated stocks at an $8.2 billion annual rate, a little below the rate of build-up in the first half of the year. The book value of inventories held by manufacturing and trade establishments increased at a $26.5 billion annual rate in September, down from the $42.2 billion rate in August and a little rate of accumulation in July. more than the For the quarter as a whole, accumulation by nonfarm businesses was at a $32.4 billion rate in book value terms. this compares with rates of accumulation of $44-1/4 billion annual rate in each of the first two quarters of the year. The inventory-sales ratio for all retail stores edged down to 1.41 in September, a little below the historical average. At general merchandise stores, however, this ratio edged up further and was at the highest level in ten years. For manufacturing and trade, the inventory-sales ratio in September was 1.41, also--quite low historically. -3- PERSONAL INCOME (Based on seasonally adjusted data) 1978 1977 QI QII QIII Aug. 78 to Sept. 78 - - Average monthly change, in billions of dollars $13.5 12.3 1.2 $12.4 15.7 -3.3 $16.5 14.1 2.4 Wage and salary disburs ements Private Manufacturing 8.3 7.0 2.7 13.1 12.2 4.0 10.6 9.6 1.9 Other income Transfer payments 5.7 1.3 1.0 1.0 6.4 .2 Total personal income Nonagricultural income Agricultural income Sept. 78 to Oct. 78 - $12.9 11.6 1.3 $21.3 19.8 1.4 7.0 6.2 1.9 8.2 7.4 2.7 15.6 12.3 4.1 9.1 3.7 5.2 1.1 6.5 1.5 $15.8 15.4 .4 - - Per cent change, compound annual rate 1/ -Total personal income Current dollars Constant dollars 2/ Wage and salary disbursements Current dollars Constant dollars 2/ 11.4 4.4 9.3 1.4 13.8 2.6 12.0 3.1 8.9 -.2 14.6 n.a. 11.0 4.1 12.1 3.9 15.9 4.5 8.6 .0 8.9 -.3 16.7 n.a. 1/ Monthly per cent changes at annual rates, not compounded; 1977 per cent change from QIV to QIV. 2/ Deflated by the CPI for all urban consumers, seasonally adjusted. -4- BUSINESS INVENTORIES (Change at annual rates in seasonally adjusted book value; billions of dollars Manufacturing and trade Manufacturing Trade, total Wholesale Retail Durable Auto Nondurable QII 1977 QII QIV QI 28.3 15.7 12.6 2.6 10.0 3.8 2.2 6.2 25;2 10.2 15,0 4;7 10.3 5.1 1.5 5.2 1748 2.8 14,9 7;5 7;4 3.9 2;8 3.5 44;2 1646 27.6 19.5 8.1 3,9 .9 4.1 QII 1978 QIII 44,3 32.4 22;8 18.1 21.5 14.4 11.8 6.1 9.8 8.2 2.1 2.1 .2 -;2 7.7 6.1 Aug. Sept. 42.2 20;6 21.6 741 14.5 3.4 .2 11.1 26.5 14.3 12.2 13.2 -1.0 - .9 -1.2 - .1 INVENTORY/SALES RATIOS QII Manufacturing and trade 1977 QIII QIV QIQ II 1978 QIII Aug. Sept. 1.46 1.48 1.44 1.46 1.42 1.43 1.40 1.41 Manufacturing 1.60 1.61 1.56 1.56 1.52 1.54 1.51 1.52 Trade, total Wholesale Retail 1.32 1.21 1.43 1.35 1,24 1.45 1.33 1.23 1.42 1.36 1.27 1.45 1.31 1.20 1.42 1.32 1.21 1.43 1.30 1.18 1.42 1.31 1.20 1.41 Updated -5- MONETARY AGGREGATES 1/ (Seasonally adjusted)Oct. '77 to 1978 QI QII QIII Aug. Sept. Oct. p Oct. '78 Major monetary aggregates M-l (currency plus demand deposits) 6.2 9.9 7.6 8.5 14.1 2. M-2 (M-1 plus time & savings deposits at CBs, other 6.9 7.9 8.9 10.4 12.5 than large CDs ) M-3 (M-2 plus all deposits at 3. 13.9 11.8 7.8 10.1 7.7 thrift institutions) Bank time and savings deposits 13.8 7.5 9.5 12.8 10.1 4. Total 5. Other than large negotiable CDs at weekly reporting banks (interest bearing component 11.5 11.8 10.0 7.3 6.4 of M-2) 9.7 1.3 8.1 2.6 1.6 6. Savings deposits 9.9 8.7 2.5 2.4 1.8 Individuals 2/ 7. 0.0 16.2 2.6 0.0 -15.5 3. Other 3/ 13.6 14.2 17.3 11.4 10.5 Time deposits 9. 4.2 11.9 8.5 3.6 6.8 Small time 4/ 10. 31.3 16.4 32.7 26.9 17.3 Large time 4/ 11. 12. Time and savings deposits sub10.7 4.4 6.4 3.8 ject to rate ceilings (6+10) 3.0 Deposits at nonbank thrift institutions 5/ 13. Total 9.0 7.6 11.6 13.9 15.8 14. Savings and loan associations 9.0 7.9 12.8 15.6 16.9 11.3 9.7 3.9 7.1 5.8 15. Mutual savings banks 18.2 15.8 13.6 11.7 20.9 16. Credit unions Average monthly changes, billions MEMORANDA: 0.7 0.8 1.5 -1.2 1.1 17. Total U.S. Govt. deposits 1.5 3.2 3.1 2.8 18. Total large time deposits 6/ 4.6 1.2 2.1 1.5 0.7 18. Nondeposit sources of funds 7/1.7 1. 3.3 7.7 6.7 8.2 10.0 9.3 7.9 11.6 9.1 -1.6 -2.9 16.0 17.7 22.8 9.2 8.6 2.0 2.3 -1.9 14.4 7.6 28.3 9.0 4.4 14.6 10.9 15.2 11.5 6.7 10.4 18.3 17.4 of dollars 4.0 0.9 5.3 0.8 3.7 1.7 p-preliminary. n.a.-not available. l/ 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 Oct. 16 Nov. 16 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 9.77(11/8) 6.58(1/11) 8.780M8) 10.31 10.44 10.63 9.68(11/15) 8.99(11/8) 6.09(4/24) 10.31(11/16) 6.63(1/6) 10.70(11/1) 12.06(11/14) 6.70(1/6) 7.00(2/8) 7.88 8.96 9.20 9.94 10.25(11/15) 6.65(1/4) 9.13(10/11) 10.25(11/15) 9.48(11/8) 10.41(11/15) 6.43(1/4) 6.66(1/5) 8.55 9.02 9.00 10.40 10.72(11/15) 6.85(1/4) 9.50(10/11) 10.72(11/15) 6.53(1/4) 8.43 5.25(11/10) 7.05(1/4) 3.55(3/3) 9.00(10/11) 4.60(10/13) 9.32(10/31) 9.00(10/31) 8.90(10/31) 7.38(1/4) 7.71(1/5) 8.00(1/5) 8.51 8.61 8.65 8.85 8.70 8.68 9.09(10/31) 9.85(11/10) 8.28(1/3) 9.09(1/3) 9.30(11/10) 9.30(11/10) 8.61(3/24) 8.48(1/6) 8.87 9.55 9.04(10/6) 9.03(10/13) 9.01(11/15) 9.83(11/15) 9.26 9.25 6.32(7/13) 5.58(3/16) 6.10(10/12) 6.11 10.27(11/13) 9.13(1/9) 9.98 9.38(9/9) 10.04(11/15) 8.17 9.02 10.04(11/15) 5.25(11/10) 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 10.27(11/13) -7REVISIONS Because of revised sources data, the following changes should be made: Part 1, page I-22 -- on that page to read: change final sentence of the full paragraph "Bank-reported private capital transactions recorded a moderate net inflow in the third quarter, following a sizable net inflow in the third quarter, following a sizable net inflow in the second quarter." Part 2, Page IV--T-1, table on U.S. International Transactions-change items indicated to read as follows: Line Line Line Line 4: 5: 13: 20: Q3, 824; Sept., 1,826. Q3, 3,701, Sept. 6,581 Sept., 622 Q3, 3,657; Sept. 872 Part 2, page IV-4 -- change line 7 to read: net inflow of bank-reported private capital, "and a moderate following a sizable". Part 2, page IV-5 -- table on U.S. International Transactions Summary -- change items indicated to read as follows: 2/ Private capital trans. adj.- : Q-3, -.1; Sept. 1.5 Private capital as rept. net : Q-3, -.4; Sept. 2.5All Other 4/: Q-l, 3.3; Q-2, 7.7; Q-3, 4.9; July, .8; Aug., 2.4; Sept., 1.9. Part 2, page IV-8 -- In line 19, change "net outflow of $0.6 billion" to read "net inflow of $1.1 billion"; and in line 21, change "outflow was more than accounted for "to read" net inflow was reduced". A-1 APPENDIX SAVINGS ACCOUNTS SUBJECT TO AUTOMATIC TRANSFER* Commercial banks and other depository institutions were permitted,beginning November 1, to offer savings accounts subject to automatic transfer (ATS accounts). A survey of media and other public sources by the Reserve Banks just prior to November 1 indicated that many large commercial banks were ready to offer ATS services and had been advertising to educate the consumer on the merits of such an account. Smaller banks (those with assets under $300 million) appeared to be promoting ATS accounts less actively; there were scattered reports that some smaller institutions were not ready to offer the service because of delays in converting their processing facilities to handle the new automatic transfers. Terms on ATS accounts varied widely across the country, with a considerable variety of monthly service fees and charges per item-usually tied to average or minimum balances maintained. Accounts with balances above some threshold--varying from $1000 to $5000--often were exempt from all service charges. Most large banks appeared to be setting the terms on ATS accounts so that it would be attractive for larger depositors to use such accounts as transactions balances. Some of the large banks also offered other plans designed as overdraft protection--and many smaller banks appeared to favor this alternative. During November 9-13, a telephone survey of 237 member and 117 nonmember commercial banks as well as 73 mutual savings banks was conducted by the Federal Reserve Banks and the FDIC. Institutions in the six New England states were not surveyed because it was found that NOW accounts were already firmly established and hence very few institutions were planning to offer ATS accounts. National estimates based on the sample data suggest that about 40 per cent of all commercial banks outside of New England were offering ATS accounts on November 8 and that another 20 per cent of all banks were planning to offer this service within the next three months. It is estimated that over 90 per cent of all banks with assets over $300 million were offering ATS accounts on that date or plan to soon, while roughly half of all banks with assets less than $300 million were offering the service or had plans to offer it on November 8. In * Prepared by Perry Quick and Darrel Parke. A-2 New York State less than one-fourth of commercial banks were offering or had plans to offer ATS accounts on that date, as most of these institutions were apparently waiting to offer NOW accounts when permitted. 1/ Outstanding ATS account balances on November 8 are estimated at $765 million. The average size of the approximately 125,000 accounts opened in the eight days ending November 8 was about $6100-which indicates that it was generally the larger depositor which found the ATS account attractive enough to induce a shift to this new service immediately after introduction. Survey respondents also gave their best estimates of the source of the funds in ATS accounts. It was reported that in many cases such responses were given reluctantly, and there appears to be substantial variation from bank to bank. The survey results suggest that slightly more than half of the funds in ATS accounts on November 8--roughly $400 million--came from demand deposits. Less than 3 per cent of the total--about $20 million-appear to have been attracted from thrift institutions. These national estimates appear to be consistent with prior staff expectations. At mutual savings banks in the eight states outside of New England where these institutions have third-party payment powers and can offer ATS accounts, an estimated 11,000 accounts were opened at 32 institutions. Outstanding balances on November 8 are estimated to have been around $2.4 million. 1/Legislation authorizing NOW accounts in New York State was not signed into law until November 10-after this survey was taken. SAVINGS DEPOSITS AUTHORIZED FOR AUTOMATIC TRANSFER All Insured Commercial Banks and All Mutual Savings Banks in States other than Mass., N.H., Conn., Me., R.I. and Vt1/ November 8, 1978 Commercial Banks New York State Number of institutions Number offering Number planning to offer in next 3 months Other All Mutual Savings Banks 13,763 5,367 13,9972/ 5,415- 155 32 2,666 3/ 2,674-: 8 122 748 4/ 125- / 765- 11 ATS accounts (thousands) ATS balances ($ millions) 2 Per cent of ATS balances from: Demand accounts at bank Savings accounts at bank Time accounts at bank Outside bank n.a. n.a. n.a. n.a. n. a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. r .a. n.a. n.a. n.a. n.a. n.a. n. a. n.a. n.a. Per cent of funds outside bank from: Other commercial banks Thrift institutions Other 1/ n.a. Based on data collected by the Federal Reserve and FDIC from a stratified random sample of 354 commercial banks and 73 mutual savings banks. 2/ 3/ 4/ 5/ Estimated Estimated Estimated Estimated standard standard standard standard n.a. = not available. error error error error is is is is 13 23 16 18 per per per per cent. cent. cent. cent. 

Federal Reserve (1978, November 20). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19781121_part3

@misc{wtfs_greenbook_19781121_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1978},
  month = {Nov},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19781121_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}