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 August 14, 1981 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 Industrial production and capacity utilization . . . . . . . . . . . . . . . . Retail sales Retail trade and business inventories . . . . Producer prices . . . . . . . . . . . . . . . . .... ... .. . . . . . . ... . ... 1 3 5 7 TABLES . . . . . . 2 2 4 6 6 8 Monetary aggregates . . . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . .. 9 Industrial production . . . . . . Capacity utilization rates . . . . Retail sales . . . . . . . . . . Changes in manufacturing and trade Inventories relative to sales . . Producer prices . . . . . . . . . . . . . . . . . . . . . . . . . . . inventories . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . THE DOMESTIC FINANCIAL ECONOMY TABLES 10 11 SUPPLEMENTAL NOTES Industrial production and capacity utilization Industrial production increased 0.3 percent in July, following a slight decline in June. Most of the July rise reflected a continuation of the post-strike rebound in coal output. A sharp reduction occurred in the output of autos and trucks and a further decline was evidenced in production of construction supplies. Growth continued in equipment output and production of materials other than coal also increased. Industrial production in July was 9.3 percent above the recent low in July 1980 and virtually the same as the high reached in March 1979. Production of consumer goods overall was unchanged in July, as sharp declines in the output of autos and utility vehicles were offset by increases in the production of home goods, such as appliances, and of consumer nondurable goods. Autos were assembled at an annual rate of 7.2 million units--down from a rate of 7.4 million units in June; a further reduction of nearly 10 percent is now scheduled for August. Equipment production advanced 0.5 percent in July, as both defense and space and business equipment increased; within the latter, production of Output of construction supplies transit equipment declined further. was again cut back, reflecting the broad decline in construction activity this year. Production of materials advanced 0.6 percent, largely reflecting the surge in coal output. Smaller, but nevertheless widespread, increases occurred in output of many durable and nondurable materials, such as chemical materials and equipment parts. -1- -2INDUSTRIAL PRODUCTION (Percentage change from preceding period; based on seasonally adjusted data) 1980 Q4 1981 Q1 Q2 May ----annual rate---Total 1981 June July ---monthly rate--- 21.3 7.4 2.4 .5 -.1 .3 Final products Consumer goods Durable Nondurable Business equipment Defense and space eq. 12.2 13.1 39.9 4.7 11.2 10.9 3.5 .0 -2.6 1.0 10.4 3.4 7.2 7.3 18.8 3.2 9.2 1.1 .8 1.1 2.2 .6 .8 .0 -.1 -.4 .0 -.5 .4 .1 .2 .0 -.7 .3 .4 .5 Construction supplies 32.2 14.1 -5.5 -.7 Materials Durable goods Nondurable goods Energy materials 34.4 48.4 38.2 -.2 12.0 17.5 8.5 3.6 -0.8 4.1 .4 -15.1 .5 .7 .1 .6 -1.8 .3 -.5 -.5 3.9 -.9 .6 .3 .5 2.1 CAPACITY UTILIZATION RATES: MANUFACTURING AND MATERIALS (Percent, seasonally adjusted) Q2 1981 June July 79.9 80.0 79.7 79.6 70.9 77.1 51.0 81.0 79.4 58.6 80.2 79.8 64.6 79.6 79.7 65.9 79.6 79.6 63.1 88.8 73.7 81.7 81.1 81.2 81.5 88.4 100.7 68.0 55.3 78.4 87.5 78.7 83.9 78.5 80.8 78.5 84.4 Nondurable goods mats. 90.9 76.8 85.9 85.3 84.8 85.0 Energy materials 88.8 83.1 84.8 80.9 83.0 84.5 Manufacturing industries Primary processing Advanced processing Motor vehicles & pts. Materials producers Durable goods mats. Raw steel 1978-80 High 1980 Low 1981 Q1 87.2 74.9 90.1 86.2 94.5 Capacity utilization in manufacturing edged down 0.1 of a percentage point to 79.6 percent in July, after declining 0.5 of a percentage point in June. In contrast, the operating rate for producers of industrial materials rose 0.3 of a percentage point to 81.5 percent in July, mainly as a result of a further post-strike increase in coal production. The July rates for both manufacturers and materials producers are close to those that have prevailed since late last year. Retail sales Retail sales in July rose 1.3 percent from June, when they had risen 1.7 percent, but with the declines in April and May they were only 0.5 percent above those in March. An increase in the value of sales at automotive products stores, 6.4 percent, was nearly as large as the rise in sales at all retail stores; in June a large rise in sales at automotive stores accounted for half the overall increase. Sales at stores excluding the automotive group and those selling mainly nonconsumer items edged up only 0.1 percent in July, following a rise of 1.1 percent in the preceding month. Sales of general merchandise, apparel, and furniture and household appliances declined 0.5 percent, with those at general merchandise stores alone down 1.3 percent; sales at the GAF grouping of stores had increased sharply in June, as had those at general merchandise stores. Sales at gasoline service stations declined in July in dollar terms for the fourth successive month. -4- RETAIL SALES (Percent change from preceding period; based on seasonally adjusted data) 1981 Q1 Q2 Apr. May June July Total sales 4.9 -.6 -2.0 -.4 1.7 1.3 (Real)1 2.9 -1.9 -2.3 -.6 1.3 n.a. Total, less autos and nonconsumption items 3.5 .8 .1 -.8 1.1 .1 Total, exc. auto group, gasoline, and nonconsumption items 3.3 1.0 .1 -.8 1.3 .2 GAF 2 3.1 1.2 .9 -1.4 2.7 -.5 8.5 10.0 4.4 -4.2 -5.8 -2.5 .7 1.5 -.7 3.3 4.7 2.5 3.7 6.4 .2 3.3 5.1 2.1 1.8 4.9 1.1 -.5 2.1 3.2 -.4 -.9 -.2 -.8 -2.0 -1.0 1.0 1.9 1.2 3.2 -.2 .1 1.3 .8 -1.3 -.6 Durable goods Automotive Furniture & appliances Nondurable goods Apparel Food General merchandise 3 Gasoline -7.3 -10.8 -1.9 .5 -.4 .8 2.5 -.2 1. BCD series 59. Data are available approximately 3 weeks following the retail sales release. Series is not yet available for July. 2. General merchandise, apparel, and furniture and appliance stores. 3. General merchandise excludes mail-order nonstores; mail-order sales are also excluded in the GAF composite sales summary. -5- Retail trade and business inventories The book value of retail trade inventories rose in June at a seasonally adjusted annual rate of $24.8 billion following a $17.6 billion rate accumulation in May. Two thirds of the June increase was at automotive stores; three fifths of the overall May rise was in autos and automotive goods. Most of the remainder of the June accumulation in retailers' inventories was in goods held by general merchandise stores, where they also had increased appreciably in the preceding month. The large June rise in retail trade inventories was accompanied by a 1.7 percent increase in sales, and the inventory-to-sales ratio remained unchanged at 1.35. The book value of manufacturing and trade inventories rose at a $39.0 billion annual rate in June, at a slightly higher rate than in May. The inventory-sales ratio for manufacturers and trade establish- ments in June also was unchanged from May. Over the second quarter, these nonfarm business stocks were accumulated at a $32.2 billion rate, down from a $41.1 billion rate buildup over the first quarter of the year. Retail stores accumulated stocks at a $16.4 billion annual rate over the second quarter, at a considerably faster pace than the $6.8 billion rate over the first quarter. -6CHANGES IN MANUFACTURING AND TRADE INVENTORIES (Billions of dollars at annual rates) 1979 1980 Q1 Q2 1981 Apr. May(r) June(p) 49.0 31.5 12.3 12.9 6.2 10.3 .6 7.2 1.4 31.0 16.4 2.5 8.7 5.2 11.7 1.3 2.9 -2.3 41.1 34.2 10.1 13.3 10.8 .0 -2.4 6.8 -3.3 32.2 11.0 -.1 3.5 7.6 4.8 .5 16.4 12.2 19.1 11.8 7.3 5.2 -.7 .6 .8 6.7 9.6 38.8 21.0 -6.7 13.4 14.4 -.3 -4.6 18.0 10.9 39.0 .2 -.8 -8.0 9.0 14.1 5.4 24.8 16.6 -2.5 -1.0 .6 -2.2 -1.3 4.6 -1.6 -4.3 n.a. n.a. n.a. n.a. 6.1 .7 .0 5.4 11.2 1.3 2.3 7.6 n.a. n.a. n.a. n.a. Book Value Basis Total Manufacturing Materials Work-in-Process Finished Goods Wholesale Automotive Retail Automotive Constant Dollar Basis Total Manufacturing Wholesale Retail 7.2 6.8 .4 -.1 INVENTORIES RELATIVE TO SALES 1 May2 1980 Q4 Q1 Q2 1981 Apr. 1.53 1.76 1.21 1.44 1.40 1.59 1.12 1.35 1.39 1.61 1.08 1.31 1.41 1.60 1.11 1.37 1.39 1.60 1.08 1.33 1.40 1.61 1.10 1.35 1.40 1.58 1.12 1.35 1.77 2.12 1.46 1.48 1.66 1.96 1.39 1.42 1.64 1.97 1.37 1.36 n.a. n.a. n.a. n.a. 1.67 1.98 1.40 1.39 1.69 1.98 1.46 1.41 n.a. n.a. n.a. n.a. May(r) June(p) Book Value Basis Total Manufacturing Wholesale Retail Constant Dollar Basis Total Manufacturing Wholesale Retail 1. Ratio of end-of-period inventories to average monthly sales for the period. 2. Period of cyclical peak in ratios. (r) Revised estimates. (p) Preliminary estimates. Producer prices Producer prices of finished goods in July rose at a relatively moderate rate, overall; at a 5-1/4 percent annual rate, the increase was a trifle less than the average in the two preceding months. However, the rate of increase in prices of finished foods accelerated sharply in July--to a 17-1/2 percent annual rate from a 5-3/4 percent rise in June; over the first half of this year these food prices had increased at about a 1-1/2 percent annual rate. Prices of capital equipment continued to rise sharply in July--at an 8.6 percent annual rate and about the same as in June; these rates of rise are considerably less than the 11-1/4 percent annual rate increase over the fourth quarter of last year and the first half of this year. Prices of finished energy goods declined at a 12-1/2 percent annual rate in July; early in the year they had risen very substantially. Producer prices of consumer finished goods other than food and energy rose only a little in July--at a 2.2 percent annual rate; in most months over the year ended in June these prices had risen at a 6 percent annual rate or more and they had increased 8 percent over that period. Producer prices of crude materials and of intermediate materials, supplies, and components also rose moderately in July--at annual rates of 6-1/2 percent and 4-3/4 percent, respectively. However, excluding items for food and feed and for energy, these materials prices rose sharply--at a 29 percent rate for crude materials and at an 8-1/2 percent rate for intermediate items. Prices of crude materials for both the foods and feeds and energy groupings rose only modestly and prices of intermediate materials for food and feed and for energy declined. -8- RECENT CHANGES IN PRODUCER PRICES (Percentage change at annual rates; based on seasonally adjusted data)1 Relative importance Dec. 1980 1981 1980 Q1 Q2 June July 100.0 23.1 56.6 12.0 44.6 20.3 11.8 7.5 14.2 27.8 10.4 11.4 13.3 1.6 18.6 66.8 7.8 12.0 5.8 1.5 6.6 2.0 8.0 10.1 6.7 5.7 6.1 2.3 7.7 8.7 5.3 17.6 -. 9 -12.4 2.2 8.6 Intermediate materials 2 93.6 Exc. energy 77.3 12.4 10.1 14.3 8.0 7.4 8.5 3.5 6.0 5.4 8.5 57.7 42.3 15.5 8.6 19.1 7.5 -23.1 39.7 -36.7 8.5 6.5 22.1 33.2 -6.4 -10.2 3.6 9.2 29.0 Finished goods Consumer foods Consumer nonfood Energy Exc. energy Capital equipment Crude food materials Crude nonfood Exc. energy 1. Changes are from final month of preceding period to final month of period indicated. 2. Excludes materials for food manufacturing and animal feeds. -9MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted)1 1980 1981 Q1 Q4 Q2 May July '80 to June July July '81 ---- Percentage change at annual rates ---Money stock measures 1. M1-A 2. (Adjusted) 2 3. M1-B 2 (Adjusted) 4. 5. M2 6. M3 Selected components 7. Currency 8. Demand deposits 9. Other checkable deposits 8.2 n.a. 10.8 n.a. 8.1 11.3 -20.8 (-1.7) 4.9 (-0.8) 8.3 12.4 -5.3 (5.1) 8.7 (5.3) 10.6 10.5 -9.9 -5.6 (-6.1) (-10.1) -6.1 -7.5 (-5.1) (-8.8) 3.7 4.1 10.0 8.5 8.8 5.5 7.9 9.1 7.9 -32.9 -11.8 -11.8 52.9 372.3 107.4 -7.1 3.6 7.3 15.3 -15.5 10.2 1.5 16.2 7.6 -2.2 12.5 9.4 0.0 84.5 6.0 -30.5 30.2 3.5 -29.6 19.0 11.3 58.9 6.9 139.9 10.2 4.5 8.0 43.9 47.8 5.9 -24.0 22.0 -0.5 -24.5 9.2 10. 11. 12. 13. 14. 15. 16. 17. 18. M2 minus M1-B (11+12+13+16) 3 Overnight RPs and Eurodollars, NSA Money market mutual fund shares, NSA Commercial banks savings deposits small time deposits Thrift institutions savings deposits small time deposits 19. 20 21. Large time deposits 4 at commercial banks, net at thrift institutions 28.1 24.8 44.9 22. Term RPs, NSA 47.7 113.7 4.2 -11.9 13.4 - 0.3 -12.8 -16.0 15.8 1.4 -22.2 1.0 -14.0 -0.7 (2.8) 4.2 (3.4) 8.0 -4.0 n.a. 7.8 n.a. 9.1 8.5 11.6 10.0 7.9 -6.6 -9.2 34.0 202.6 9.1 -30.2 112.4 5.7 -11.5 14.5 -4.5 -18.6 9.5 30.7 66.6 7.0 -11.2 19.4 3.2 -12.2 10.6 4.8 10.8 39.6 40.6 34.7 10.3 10.1 11.2 34.3 37.2 23.0 43.7 50.2 10.0 15.5 19.1 -2.5 27.5 27.3 16.4 2.1 42.0 34.4 -24.3 26.1 1.0 28.6 -- Average monthly change in billions of dollars-MEMORANDA: 23. Managed liabilities at commercial banks (24+25) 24. Large time deposits, gross 25. Nondeposit funds 26. Net due to related foreign institutions, NSA 5 Other 27. 28. U.S. government deposits at 6 commercial banks 9.1 7.0 2.1 4.0 5.1 -1.1 -0.2 2.4 -1.6 0.4 -0.9 1.1 7.7 16.9 10.5 6.4 10.9 8.8 2.1 9.2 -1.5 0.5 0.4 9.1 -2.7 -3.2 5.3 -0.2 -1.3 -0.3 1.9 -3.3 1. Quarterly growth rates are computed on a quarterly average basis. 2. Figures in parentheses have been adjusted to remove the distorting effects since the beginning of 1981 of shifts of funds out of demand deposits and other accounts into NOW accounts. Based on a variety of evidence, it is estimated that 77-1/2 percent of inflows into other checkable deposits--in excess of "trend"-was from demand deposits in January, and 72-1/2 percent in subsequent months. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks, net of amounts held by money market mutual funds, plus overnight Eurodollar deposits issued by Caribbean branches of U.S. member banks to U.S. nonbank customers. 4. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 5. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase and other liabilities for borrowed money (including borrowings from the Federal Reserve), loans sold to affiliates, loan RPs, and other minor items. Changes since October 1980 are partially estimated. 6. Consists of Treasury demand deposits at commercial banks and Treasury note balances. n.a.-not available. e--estimated. -10COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 1980 Q4 Q3 ---------1. 2. Total loans and investments at banks 2 Investments ~ Q1 1981 Q2 e May June Julye July 80 to July 8 1 e Commercial Bank Credit ----------- 12.9 14.6 7.7 7.3 11.7 5.7 5.7 10.9 20.5 11.9 10.5 6.2 12.3 7.5 5.7 11.0 3. Treasury securities 39.1 11.1 15.2 15.7 25.0 18.4 11.1 18.0 4. Other securities 11.5 12.3 8.2 1.3 5.5 1.6 2.7 7.5 10.2 15.6 6.8 7.7 11.4 5.3 5.6 10.8 15.2 21.0 6.6 10.1 11.9 15.3 17.6 15.2 -10.2 60.1 27.3 36.2 18.2 23.9 -58.5 30.9 4.5 11.0 9.4 7.3 9.4 5.3 6.6 8.5 -7.6 -0.2 -1.4 -1.1 -4.1 1.4 n.a. n.a. 5. Total loans 2 6. Business loans 2 7. Security loans 8. Real estate loans 9. Consumer loans -10. 11. 12. Total short- and intermediateterm business credit (sum of lines 14, 15 and 16) Business loans net of bankers acceptances Short- and Intermediate-Term Business Credit -- 8.9 14.5 13.9 14.8 16.6 21.5 n.a. n.a. 14.3 24.2 5.8 7.0 13.0 14.3 17.8 15.4 Commercial paper issued by nonfinancial firms3 -3.0 30.7 40.9 48.9 82.9 7.8 13.6 13. Sum of lines 11 & 12 21.2 8.3 12.6 17.1 22.0 16.5 15.2 14. Line 13 plus loans at foreign branches 4 9.6 19.6 11.6 12.7 15.5 22.3 18.4 15.5 Finance company loans to business 5 -4.6 14.6 8.5 19.3 23.1 30.8 n.a. n.a. Total bankers acceptances outstanding 5 21.0 -15.7 35.6 23.1 15.7 n.a. n.a. 15. 16. 5.8 1. Average of Wednesdays for domestic chartered banks and average of current and preceding ends of months for foreign-related institut 2. Loans include outstanding amounts of loans reported as sold outright to a bank's own foreign branches, unconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and unconsolidated nonbank subsidiaries of the holding company. 3. Average of Wednesdays. 4. Loans at foreign branches are loans made to U.S. firms by foreign branches of domesticchartered banks. 5. Based on average of current and preceding ends of months. n.a.--not available. e--estimated. -11SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) 1981 1980 Dec. High Mar. Low Early May High FOMC July 7 Aug. 13 Change from: Early May FOMC July 7 High Short-term rates Federal funds 2 19.83 13.48 18.91 19.93 18.29 -. 62 Treasury bills 3-month 6-month 1-year 17.14 15.74 14.06 12.36 11.58 11.50 17.01 15.83 14.85 14.89 14.47 13.63 15.42 15.44 14.54 -1.59 -. 39 -. 31 .53 .97 .91 Commercial paper 1-month 3-month 6-month 20.77 19.88 18.58 12.62 12.48 12.19 18.57 18.29 17.38 17.92 16.68 15.38 17.59 17.21 16.54 -. 98 -1.08 -. 84 -.33 .53 1.16 Large negotiable CDs 3 1-month 3-month 6-month 21.29 20.90 19.19 12.94 12.99 12.94 18.80 19.01 18.50 17.97 17.34 16.66 17.93 17.92 17.90 -. 87 -1.09 -. 60 -.04 .58 1.24 Eurodollar deposits 2 1-month 3-month 22.54 21.36 13.84 14.31 19.39 19.56 18.86 18.19 18.80 18.78 -. 59 -.78 -.06 .59 Bank prime rate 21.50 17.00* 19.00 20.00 20.50 1.50 .50 U.S. Treasury (constant maturity) 3-year 10-year 30-year 14.41 13.57 13.17 12.85 12.58 12.16 15.69 14.69 14.11 14.73 14.04 13.42 15.83 14.65 13.88 .14 -. 04 -. 23 1.10 .61 .46 Municipal (Bond Buyer) 10.56 9.81 10.94 10.85 4 11.634 Corporate Aaa New issue Recently offered 14.51 15.03 14.42 13.98 16.12 16.26 - 5 14.946 _-5 16.69p 6 -- 16.646 June 30 16.12 1981 FOMC July 7 .49 1.01 17.136 Percent change from: FOMC Dec. 31 July 7 976.88 76.15 374.63 215.75 954.15 74.39 360.77 208.01 -1.64 Intermediate- and longterm rates .78 1.75 Primary conventional mortgages 14.95 1980 Dec. 31 Stock Prices 963.99 Dow-Jones Industrial 77.86 NYSE Composite 348.99 AMEX Composite 202.34 NASDAQ (OTC) 1. One-day quotes except as noted. Averages for statement week closest to date shown. Secondary market. One-day quotes for preceding Thursday. Aug. 13 -1.0 -2.1 944.35 4.1 -. 4 77.53 5.2 8.2 380.36 2.0 4.7 212.36 5. Averages for preceding week. 6. * One-day quotes for preceding Friday. Low reached on April 2. GREENBOOK SUPPLEMENT Addendum: The attached table for page II-8 should replace the one in Part II of the August 12 Greenbook. II-8 AUTO SALES (Millions of units; seasonally adjusted annual rates) 1980 Q4 Q1 Q2. May 1981 June July Aug. 9.0 10.0 7.9 7.9 7.6 8.2 n.a. Foreign-made 2.5 2.7 2.3 2.2 2.2 2.3 n.a. U.S.-made 6.6 7.3 5.6 5.7 5.4 5.9 7.31 Small 3.3 3.9 2.9 2.9 2.9 3.1 n.a. Intermediate & standard 3.3 3.4 2.8 2.8 2.6 2.8 n.a. Total Note: Components may not add to totals due to rounding. 1. First 10-days. 

Federal Reserve (1981, August 17). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19810818_part2

@misc{wtfs_greenbook_19810818_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1981},
  month = {Aug},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19810818_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}