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 May 18, 1984 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 THE DOMESTIC NONFINANCIAL ECONOMY . Gross National Product . . . Page . . . . 1 TABLE: Real gross national product and related items in 1984-Q1 . Personal Income. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . 4 . TABLE: Personal income and expenditures. . . . . Congressional Budget Plans . . . . . . . ... . TABLE: Projected deficits under House and Senate plans . * . THE DOMESTIC FINANCIAL ECONOMY TABLES: Monetary aggregates . . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit. . . . . . . . . . ..... Selected financial market quotations. . . . . . . . . . . INTERNATIONAL DEVELOPMENTS Foreign Economic Developments . . . . . . . . . . . . .. . 3 . SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Gross National Product Real GNP grew at an 8.8 percent annual rate in the first quarter, according to revised estimates released by the Commerce Department on Friday. This represents an upward revision from the preliminary estimate of 8.3 percent; however, there were more sizable upward revisions to personal consumption and inventory investment, which were largely offset by an increase in the estimate of imports. Prices, as measured by the gross domestic business product fixed-weighted price index, rose 4.1 percent, the same as the preliminary estimate. However, the estimate of the increase in the GNP deflator was lowered from 4.1 percent to 3.7 percent. Real personal consumption expenditures were revised up by $3 billion, largely reflecting higher estimates of electricity usage and an increase in the share of used car purchases attributed to households rather than businesses. The growth rate of consumption in the first quarter now is estimated as 6.9 percent, compared with 6.5 percent in the fourth quarter. Real business fixed investment now is estimated to have increased at a 15 percent annual rate in the first quarter, compared with 12 percent shown in the preliminary figures. The revision is due primarily to an increase in the estimate of imports of producers' durable equipment. Real inventory investment by nonfarm businesses was revised up by $3.5 billion, reflecting the most recent surveys of inventories in the manufacturing and trade sectors. The increase in the rate of nonfarm inventory accumulation now accounts for almost half of the growth in real GNP in the first quarter. The most sizable downward revision to the GNP figures was in real net exports of goods and services, which now are estimated to be in deficit at a rate of $10.3 billion, compared with a deficit at a rate of $6.5 billion shown in the preliminary estimate. The change reflects recent merchandise trade data. The latest GNP release contains the Commerce Department's initial estimate of corporate profits for the first quarter. Profits increased 15 percent at an annual rate from the fourth quarter, and the share of pre-tax profits in GNP remained at 7.8 percent. May 18, 1984 REAL GROSS NATIONAL PRODUCT AND RELATED ITEMS IN 1984-Q1 (Percent change from previous period at compound annual rates; based on seasonally adjusted data) "Flash" Preliminary Revised 1. Gross national product 7.2 8.3 8.8 2. Final sales a. Private b. Excluding net exports 3.9 5.0 7.2 3.6 4.7 7.8 3.2 4.4 8.8 3. Personal consumption expenditures 5.6 5.8 6.9 4. Business fixed investment 13.7 12.1 14.6 5. Residential investment 16.7 31.3 25.7 6. Government purchases 7. 8. .0 -.8 -2.2 Exports 12.2 9.7 7.4 Imports 34.9 41.7 53.7 Change in total business inventories1 a. Nonfarm1 b. Farm1 21.4 11.1 10.4 26.6 18.0 8.6 30.1 21.5 8.6 10. Net exports1 -3.8 -6.5 -10.3 11. Nominal GNP 12.0 12.8 12.8 12. GNP implicit price deflator 4.4 4.1 3.7 13. Gross domestic business product 4.5 4.1 4.1 5.8 6.1 5.8 ADDENDA: 9. fixed-weighted price index 14. Saving rate (percent) 1. Level, billions of constant dollars. SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Personal Income Personal income rose at a $14.8 billion annual rate in April, about the same as in March, but somewhat less than the average increase in over the previous six months. Wage and salary growth spurted to a $21 billion rate following gains of around $7 billion in February and March. However, farm income dropped sharply in April, reflecting the end of payments under the PIK program. Personal outlays, which are computed in part from retail sales data, increased at a $26 billion annual rate in April; there was an $8 billion rise in service consumption as well as increases in spending for durable and nondurable goods. The saving rate in April is estimated to have been 5.8 percent, the same as the average rate in the first quarter. Previously, the first quarter saving rate was reported to be 6.1 percent. PERSONAL INCOME AND EXPENDITURES (Based on seasonally adjusted data) 1983 1982 1983 Q3 Q4 Q1 1984 Feb. Mar. Apr. - - Percentage changes at annual rates1 - Total Personal Income Nominal Real 2 4.6 -.3 7.7 4.2 7.3 3.0 11.1 8.1 13.4 9.6 8.6 8.6 6.1 .0 6.0 - Disposable Personal Income Nominal Real 5.1 .2 8.8 5.2 11.0 6.5 11.0 8.0 13.9 10.1 8.8 8.8 6.4 .8 4.8 Expenditures Nominal Real 7.5 2.5 9.0 5.4 6.5 2.2 9.4 6.5 10.6 6.9 -12.7 -12.7 4.3 -1.3 13.6 3 - - Changes in billions of dollars - - Total personal income Wages and salaries Private Manufacturing 10.6 5.1 3.4 -.6 17.9 11.2 9.7 3.7 16.3 10.3 8.8 4.0 26.0 11.4 9.9 2.8 27.6 12.4 10.1 4.7 20.9 8.4 6.8 3.9 14.9 6.2 4.8 2.0 Other income Farm proprietors 6.0 -8.9 7.5 -.6 6.6 -1.4 15.2 5.1 17.2 5.4 12.9 1.9 9.0 -4.8 -3.0 -15.6 Disposable personal income 10.0 17.2 21.9 22.2 24.7 18.3 13.4 10.1 Expenditures Durables Nondurables Services 12.0 2.5 1.9 7.6 16.0 4.3 4.0 7.8 10.0 -.3 3.2 7.1 19.1 9.7 1.4 8.1 11.0 -.8 5.4 6.3 -24.3 -9.4 -12.9 -1.9 8.1 -2.8 25.8 4.2 13.7 7.9 4.9 4.9 5.2 5.8 6.3 Personal saving rate (percent) 5.8 1. Changes over periods longer than one of preceding period to final quarter of periods are compounded rates of change; 2. Total personal income is deflated by deflator. -1.8 12.7 6.5 5.8 quarter are measured from final quarter period indicated. Changes for quarterly monthly changes are not compounded. the personal consumption expenditure 3. Average monthly changes are from the final month of the preceding period to the final month of period indicated; monthly figures are changes from the preceding month. 14.8 20.8 19.4 6.2 SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Congressional Budget Plans The Senate approved a spending reduction plan on May 17 to accompany the tax measure passed earlier. Together, the Senate actions would reduce deficits about $142 billion over the fiscal 1985-1987 period. The House budget resolution passed earlier would lower deficits $182 billion over the same period. The House and Senate plans include similar size increases in taxes, but on the spending side there are major differences in the limits proposed for defense and domestic outlays. These differences need to be considered by a conference committee probably after the Memorial day recess. In addition, some specific spending reductions need to be implemented later in the summer through the appropriation process. PROJECTED DEFICITS UNDER HOUSE AND SENATE PLANS (Unified basis, billions of dollars) -1985 Fiscal Year--1986 1987 House 175 172 182 Senate 182 186 204 MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) 1 ----------------------------. 1983 1984 ----- Q2 ---- - ---- - ------ - ---- -- 1. 2. 3. 4. M1 (M1) M2 M3 5. Demand deposits 4.2 7. Other checkable deposits 28.5 8. M2 minus M1 18.2 13. 14. 15. 48.1 Overnight RPs and Eurodollars, NSA 4 General purpose and broker/dealer money market mutual fund shares, NSA -44.4 Commercial banks 18.4 Savings deposits, SA, plus MMDAs, NSA 5 62.8 -21.2 Small time deposits Thrift institutions 11.9 Savings deposits, SA, plus MMDAs, NSA 5 53.8 Small time deposits -17.1 16. M3 minus M2 18. 19. 20. 21. 22. 23. 6 Large time deposits At commercial banks, net 7 At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA - -----------------. 9.S (7.9) 4.9 7.4 4.8 (4.6) 8.5 9.9 7.2 (8.9) 6.8 8.9 5.8 (8.1) 3.7 9.1 8.8 (2.0) 7.2 18.8 5.4 (7.0) 6.6 9.5 --------------- 18.2 11. 12. Apr. Levels in bill. of dollars Apr. 1984 Selected components --- **------------5. Currency 9. 10. Q4 Q1 Mar. ------------------------- ----------... Growth from 04 1983 to Apr. 1984 Percentage change at annual rates 11.4 (12.7) 16.6 9.3 3 Q3 - May 18, 1984 - 9.1 4.0 21.2 6.1 5.6 7.2 151.8 -8.5 1.2 1.1 5.9 245.2 9.6 16.2 13.5 9.6 6.7 3.2 -19.5 9.5 133.1 1707.0 23.4 -13.1 12.2 -1.2 12.4 9.8 5.4 22.8 6.2 18.8 7.8 146.1 729.6 11.8 13.7 7.3 5.9 19.3 7.3 6.5 4.4 6.5 18.1 2.4 6.5 7.4 7.5 7.1 373.8 355.7 781.2 1.1 12.3 -7.8 18.8 -6.6 11.8 4.8 9.1 328.0 453.3 16.3 18.1 31.4 548.5 15.5 -0.4 57.6 24.4 9.8 58.2 27.5 23.1 36.5 25.9 25.9 19.1 39.6 355.2 236.3 118.9 16.6 SO. -1.3 18.9 17.6 10.5 5.8 28.7 53.1 5.5 0.8 58.2 8.7 58.4 97.4 9.8 -6.3 -14.6 51.2 11.9 -4.6 63.5 -Average 8.7 -8.1 3.8 -41.7 48.4 28.9 9.7 -17.8 15.2 -1.7 14.3 -38.7 9.3 4.8 -16.8 56.2 41.8 Monthly change in billions of dollars-- ncl10AtIDA 24. 25. 26. 27. 28. Managed liabilities at commercial banks (25+26) Large time deposits, gross tlondeposit funds Bet due to related foreign institutions, USA Other 8 29. 0. . government deposits at comercial banks 9 9.9 -4.0 4.0 -2.8 -2.6 -0.8 4.7 2.0 2.7 9.8 5.3 4.5 6.2 3.2 3.6 403.6 292.2 5.1 2.4 1.6 1.2 -2.6 2.9 2.1 2.1 8.7 4.8 -8.3 3.8 8.1 -33.5 144.9 9.3 1.6 -1.2 1.2 -3.9 -*.8 15.9 5.2 8.1 111.4 1. Quarterly growth rates are computed on a quarterly average basis. Dollar amounts shown under emoranda for quarterly changes are calculated on an end-month of quarterly basis. 2. nl seasonally adjusted using an experimental model-based procedure applied to weekly data. 3. Pontranstractions 12 is seasonally adjusted as a whole. 4. Overnight and continuing contract RPs issued to the sonbank public by commercial banks plus overnight Eurodollar deposits issued by branches of U. S. banks to . S. nonbank customers, both met of amounts held by money market utual funds. Excludes retail RPs, which are in the small tine deposit component. S. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (:OUDAs), not, seasonally adjusted. Conmercial bank savings deposits excluding tflDAs declined during February, tarch, and April, at rates of 18.2, 11.1, and 2.8 percent respectively. At thrift institutions, savings deposits excluding MnDAs declined during February at a rate of 8.8 percent, and increased in March and April at rates of 9.7 and 0.7 percent respectively. The non-M2 component of N3 is seasonally adjusted as a whole. et of large-denomination tim deposits held by money market mutual funds and thrift institutions. insists of borrowings from other than comercial banks in the fors of federal funds purchased, securities rold under agreements to repurchase and other liabilities for borrowed money (including borrowings from the Federal Reserve and unaffiliated foreign banks), loans sold to affiliates, loans Us and other minor Items. Data are partially estimated. 9. Consists of Treasury demand deposits at comercial banks and Treasury note balances. 8 COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 1983 Q3 19842 Q4 Q1 Feb. Mar. AprilP Levels in bil. of dollars AprilP 1984 Commercial Bank Credit 1. Total loans and securities at banks 3 Securities Treasury securities 3 Business loans 12.8 6.3 10.8 13.6 25.1 1.5 Other securities Total loans 8.6 9.5 3 7.6 0.6 13.5 9.4 14.1 15.9 13.3 5.6 1634.6 -0.5 -0.3 -8.2 437.3 -1.9 -2.5 -7.6 -6.4 186.1 9.5 1.4 -9.4 251.2 4.6 4.7 17.6 22.1 18.4 10.4 1197.3 18.9 15.2 29.2 7.5 438.4 144.0 -140.3 Security loans 25.1 60.8 -1.5 Real estate loans 11.6 11.4 13.4 12.4 12.9 15.6 351.2 Consumer loans 15.8 23.1 21.5 17.1 19.5 19.7 235.3 -17.6 26.8 Short- and Intermediat e-Tera Business Credit 10. 11. Business loans net of bankers acceptances Commercial paper issued by non4 financial firms 7.4 9.7 18.1 14.7 -2.7 25.9 20.1 30.7 49.9 91.0 53.9 428.8 12. Sun of lines 10 & 11 6.4 11.3 18.3 16.5 29.3 15.6 482.7 13. Line 12 plus loans at foreign branches 5 6.1 11.5 18.1 15.6 28.4 16.5 502.0 17.8 29.0 28.8 27.5 20.8 n.a. na. 20.5 18.9 -22.2 0.0 n.a. na. 9.3 14.8 24.2 n.a. 14. 15. 16. Finance company loans to business 6 6 Total bankers acceptances outstanding Total short- and intermediateterm business credit (sun of lines 13, 14 and 15) 14.8 -24.1 12.9 p--preliminary n.a.--not available. 1. Average of Wednesdays for domestically chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Growth rates beginning 1984 have been estimated after adjusting for major changes in reporting panels and definitions that caused breaks in series at the beginning of January. Data should be regarded as highly preliminary. 3. 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. 4. Average of Wednesdays. 5. Loans at foreign branches are loans made to U.S. fims by foreign branches of domestically chartered banks. 6. Based on average of current and preceding ends of month. SELECTED FINANCIAL MARKET QUOTATIONS (Percent) 1982 FOMC Highs Dec. 21 I' 1983 Spring lows 1 1984 FOMC FOMC Jan. 30 Mar. 27 May 17 Change from: FOMC FOMC Jan. 30 Mar. 27 Short-term rates Federal funds 2 15.61 8.69 8.48 9.41 9.97 10.52 1.11 Treasury bills 3-month 6-month 1-year 14.57 14.36 13.55 7.90 8.01 8.89 8.97 9.78 9.89 8.11 7.96 7.97 7.95 9.00 9.89 9.78 10.30 10.62 .89 1.33 1.62 Commercial paper 1-month 3-month 15.73 15.61 8.48 8.43 8.17 8.13 9.14 9.13 10.01 10.05 10.48 10.80 1.34 1.67 .47 .75 Large negotiable CDs 3 1-month 3-month 6-month 15.94 16.14 16.18 8.59 8.62 8.78 8.26 8.26 8.29 9.23 9.31 9.43 10.18 10.32 10.56 10.76 11.26 11.82 1.53 1.95 2.39 .58 .94 1.26 16.36 16.53 9.44 9.56 8.68 8.71 9.53 9.70 10.45 10.68 11.15 11.83 1.62 2.13 .70 1.15 17.00 11.50 10.50 11.00 11.50 12.50 1.50 1.00 13.50 9.78 8.25 8.98 8.49 8.89 9.27 9.85 10.06 10.64 10.41 11.50 1.14 1.65 U.S. Treasury (constant maturity) 15.16 3-year 14.95 10-year 14.80 30-year 9.87 10.54 10.53 9.36 10.12 10.27 10.88 11.66 11.74 11.83 12.46 12.50 12.83 13.54 13.57 1.88 1.83 1.00 1.08 1.07 Municipal revenue (Bond Buyer index) 14.32 10.814 9.21 9.954 10.394 10.82 .87 .43 Corporate-A utility Recently offered 17.47 12.90e 11.64 12.90e 13.80e 14.89e 1.99 1.09 Home mortgage rates S&L fixed-rate FNMA ARM, 1-yr. 17.66 17.41 13.635 11.135 12.55 10.54 13.295 11.405 13.485 12.105 Eurodollar deposits 2 1-month 3-month Bank prime rate Treasury bill futures June 1984 contract Dec. 1984 contract .35 .86 Intermediate- and long-term rates Stock prices Dow-Jones Industrial E Composite AMEX Composite NASDAQ (OTC) 1.95 Highs 1984 FOMC FOMC Jan. 30 Mar. 27 .39 .58 13.875 .60 1.30 12.705 Percent change from: 1983 FOMC Jan. 30 highs May 17 776.92 1287.20 1221.52 1154.31 1142.27 -11.3 -6.5 58.80 118.65 159.14 99.63 249.06 328.91 90.55 209.19 249.10 90.07 206.61 246.12 -9.6 -17.0 -25.2 -4.3 -5.0 -8.6 1982 1983 Lows 94.12 217.53 269.23 1. One-day quotes except as noted. 4. One-day quotes for preceding Thursday. 2. Averages for statement week closest to date shown. 5. One-day quotes for preceding Friday. p-preliminary. e--estimated. 3. Secondary market. SUPPLEMENTAL NOTES INTERNATIONAL DEVELOPMENTS Foreign Economic Developments In France provisional data indicate that real GDP increased by 0.4 percent (s.a.) in the first quarter due mainly to an increase in inventories. The unemployment rate increased for the seventh consecutive month in April, rising to 9.8 percent from 9.6 percent in March. Consumer prices increased by 0.6 percent (n.s.a.) in April, near the pace of the first three months of the year, as the year-over-year inflation rate eased to 7.9 percent. Industrial production in the United Kingdom fell 1.4 percent (s.a.) in March after declining 1.7 percent in February. As a result, the average level of production in the first quarter was essentially unchanged from that in the fourth quarter of last year. U.K. government sources attribute the decrease to the coal miner's strike and stated that without the effects of the strike, industrial production would have risen slightly in March. U.K. consumer price inflation remained steady through April. In that month the retail price index was 5.2 percent above its year-earlier level, equal to the equivalent figure observed on average in the first quarter of the year. Canadian consumer prices increased .2 percent in April or 4.9 percent above April of last year. This year-over-year increase compares with an average increase of 5.2 percent in the first quarter relative to the first quarter of last year. 

Federal Reserve (1984, May 21). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19840522_part3

@misc{wtfs_greenbook_19840522_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1984},
  month = {May},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19840522_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}