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 III - FOMC December 14, 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 Page Industrial production . . . . . . . . Retail sales . . . . . . . . . . . Domestic auto sales. . . Producer price index . . Retail inventories . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . Tables Industrial production Retail sales . . . . . Recent changes in producer prices Changes in manufacturing and trade inventories . . . . . . . . . . . . . . . . . . . THE DOMESTIC FINANCIAL ECONOMY Tables Monetary aggregates . . . . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . . . INTERNATIONAL DEVELOPMENTS . . . . . . . . . . . . . . . SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Industrial production The index of industrial production increased an estimated 0.4 percent in November following declines of 0.6 percent in September and 0.4 percent in October; output levels for September and October were revised downward. The November production advance reflected a sizable rise in auto assemblies from the strike-reduced rates in the preceding two months. auto production, the November index was about unchanged. Excluding Output of home goods, business equipment and construction supplies decreased again, while production of materials turned up and defense and space equipment continued to advance strongly. Retail sales Retail sales are estimated to have increased 1.8 percent in November according to the Census Bureau's advance report, the strongest monthly increase since April. The November sales advance was broadly based, with all major categories of stores showing increases. In particular, spending for such largely discretionary goods as general merchandise and apparel-up 2.6 percent and 3.9 percent, respectively-more than retraced their declines in October. More complete sample counts raised earlier estimates of total sales for September and October. Expenditures in September are now reported to have increased 1.5 percent (rather than 1.2 percent), and outlays in October now show a 0.1 percent increase (instead of a 0.1 percent decline). Domestic auto sales Sales of domestic automobiles rebounded to an 8.7 million unit annual rate during the first 10 days of December, following a drop in sales in late November. Taken together, auto sales over the recent 20-day period averaged 7.6 million units, compared with a 7.3 million unit pace experienced from early October to mid-November. All three major domestic manufacturers reported increased sales in early December. Producer price index Producer prices of finished goods rose 0.5 percent in November, after declining in the preceding two months. 0.7 percent The reversal reflected, in part, a rise in the index for finished foods--mainly meats and poultry; the food index had shown little change or declines in the previous three months. Prices for a wide variety of other consumer goods also picked up in November. The index of capital equipment prices rose 0.2 percent in November, with increases machinery items. reported for cars, light trucks, and a number of At the intermediate level, the index excluding food and energy rose 0.3 percent--only slightly above the average pace reported earlier in the year. Retail inventories The book value of retail trade inventories increased at a $22 billion annual rate in October, following a $9 billion rise the preceding month. A jump in auto stocks accounted for nearly half of the October increase. Inventories at general merchandisers--where sales had been weak in October-rose at nearly a $5 billion annual rate. The inventory-sales ratio in the retail sector edged up to 1.37 in October, the same as the average ratio in the 3 third quarter. Total manufacturing and trade inventories accumulated at a $57 billion annual rate in October, slightly higher than the September rate, but about equal to the average rate in the first half of 1984. With total manufacturing and trade sales up only slightly in October, the inventory-sales ratio rose to 1.38, compared with 1.33 in the first half of the year. INDUSTRIAL PRODUCTION (Percentage change from preceding period; based on seasonally adjusted data) 1984 Q2 ---- Total (Excluding motor vehicles and parts) Final products Consumer goods Durable Nondurable Business equipment Defense and space equipment Construction supplies Materials Durable goods Nondurable goods Energy materials Q3 Annual rate---- Sept. 1984 Oct. Nov. -- Monthly rate-- 8.6 6.3 -. 6 -. 4 .4 9.3 6.0 -. 4 -. 4 .1 8.9 6.0 -1.4 9.1 13.4 12.8 8.8 1.5 -1.0 2.5 23.1 12.0 -.4 -.6 -1.8 .0 -.6 1.2 .0 .1 -. 9 .4 -.8 1.4 1.0 2.5 .4 -. 3 7.6 1.7 -1.1 -. 4 -. 3 8.6 11.7 6.3 3.7 3.2 6.2 -1.2 2.2 -.8 -.9 -1.0 -.4 -1.0 -. 9 .0 -2.9 .6 .9 December 13, 1984 Retail Sales (Seasonally adjusted percentage change) Q1 1984 ------ -- ------Q2 Q3 Total sales 3.5 2.9 (REAL) <1> 2.7 3.0 Total less automotive group, nonconsumer stores,and gasoline stations 3.0 2.5 .5 GAF <2> 3.2 3.9 Durable Automotive group Furniture and appliances 5.1 5.7 3.5 Nondurable Apparel Food General merchandise <3> Gasoline stations 2.7 2.4 2.2 3.4 .3 Nov./ Q3 -.9 .1 1.3 -.2 2.0 2.2 -1.3 1.9 -.6 2.8 4.0 -2.3 2.4 4.3 4.6 3.8 -2.4 -4.4 1.4 5.4 5.9 2.9 .7 .5 4.9 3.7 5.9 -1.2 1.7 1.0 .5 2.1 6.3 2.3 3.0 1.4 .0 -3.2 1.0 -.3 -3.4 1.3 2.7 2.3 2.8 2.3 2.0 4.6 2.8 3.5 .8 -1.7 -3.2 -1.4 -2.3 -.3 1.8 3.9 2.4 2.6 2.0 ...... <1> BCD series 59. Data are available approximately 3 weeks following the retail sales release. <2> General merchandise, apparel, furniture and appliance stores. <3> General merchandise excludes mail order nonstores; mail order sales are also excluded in the GAF grouping. ..... Nov 1.5 -1.3 2.7 1984 ---------Sept Oct Data are unavailable because of a future release date. 1.8 ...... RECENT CHANGES IN PRODUCER PRICES (Percentage change; based on seasonally adjusted data)1 Relative Importance Dec. 1983 1982 1983 Q1 1984 Q2 -Annual 100.0 24.0 12.0 41.9 22.2 3.7 2.1 -.1 5.3 3.9 Intermediate materials 2 Exc. energy 94.8 79.5 .2 .6 Crude food materials Crude energy Other crude materials 52.8 31.3 15.9 1.5 2.6 -7.6 Finished goods Consumer foods Consumer energy Other consumer goods Capital equipment Q3 rate-- 1984 Oct. Nov. --Monthly rate-- 5.7 16.9 -8.1 4.5 3.8 -.4 -8.5 7.5 1.3 2.3 .4 3.3 -16.7 2.5 2.9 -.2 .1 1.5 -.5 -.6 .5 .7 .6 .5 .2 1.5 3.0 2.9 3.8 3.3 2.0 -1.0 .4 .2 .2 .3 .3 8.0 -4.6 15.5 12.5 -1.6 -9.7 -21.7 4.0 31.6 -4.9 1.0 -14.0 -1.1 -.3 -1.5 4.9 -.9 -1.5 .6 2.3 -9.2 1.9 1.9 1. Changes are from final month of preceding period to final month of period indicated. 2. Excludes materials for food manufacturing and animal feeds. CHANGES IN MANUFACTURING AND TRADE INVENTORIES (Billions of dollars at annual rates) 1984 1984 Q1 Q2 Q3 Aug. Sept.r 73.7 27.8 56.3 40.4 55.1 31.6 61.8 42.1 49.2 22.2 56.6 14.6 13.6 32.3 10.5 21.8 10.1 5.8 -4.3 10.1 16.8 6.7 1.8 4.9 5.4 14.4 5.5 8.9 18.3 8.7 9.3 -. 6 19.6 22.4 9.6 12.8 24.4 9.1 19.7 13.8 23.6 12.6 26.4 15.2 19.2 10.8 -- 3.9 11.4 4.1 1.7 7.9 3.1 8.0 3.3 4.4 3.9 3.8 7.7 -3.0 4.7 .2 2.9 -. 1 3.3 2.7 1.2 Oct.P Book value basis Total Manufacturing Wholesale trade Retail trade Automotive Ex. auto Constant dollar basis Total Manufacturing Wholesale trade Retail trade Automotive Ex. auto - r--revised estimates. p--preliminary estimates. INVENTORIES RELATIVE TO SALES1 Cyclical Reference Points 2 1981 Low 1982 High Q1 1984 Q2 Q3 Aug. 1984 Sept.r Oct.P Book value basis Total anufacturing Wholesale trade Retail trade Automotive Ex. auto 1.39 1.60 1.06 1.36 1.59 1.29 1.53 1.77 1.28 1.44 1.88 1.36 1.33 1.44 1.11 1.37 1.49 1.34 1.33 1.47 1.09 1.34 1.37 1.33 1.36 1.49 1.14 1.37 1.46 1.35 1.35 1.48 1.13 1.37 1.44 1.30 1.37 1.50 1.14 1.36 1.48 1.33 1.38 1.51 1.16 1.37 1.43 1.36 1.62 1.91 1.34 1.34 1.49 1.28 1.75 2.11 1.52 1.44 1.81 1.37 1.52 1.73 1.33 1.34 1.38 1.33 1.51 1.76 1.30 1.31 1.27 1.33 1.55 1.79 1.36 1.34 1.32 1.35 1.53 1.76 1.34 1.34 1.30 1.36 1.55 1.80 1.37 1.33 1.33 1.33 -- Constant dollar basis Total Manufacturing Wholesale trade Retail trade Automotive Ex. auto 1. Ratio of end-of-period inventories to average monthly sales for the period. 2. Highs and lows are specific to each series and are not necessarily coincident. r--revised estimates. p--preliminary estimates. December 14, 1984 MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted)1 1983 Q4 ------1. 2. 3. Q2 1984 Q3 Oct. Nov.P Growth from Q4 1983 to Nov. 1984P Percentage change at annual rates -----6.2 6.9 10.3 Ml M2 :M3 -7.4 6.0 10.7 8.6 14.9 15.9 Levels in billions of dollars Nov. 1984P Selected components 9.7 8.7 7.2 7.6 3.8 2.3 157.5 -0.5 1.2 3.4 0.2 -12.7 9.8 245.8 Other checkable deposits 9.6 16.2 9.9 8.8 -10.2 13.8 141.2 M2 minus M12 9.7 6.8 7.1 6.8 10.2 16.9 1796.8 23.4 19.3 -7.5 -1.4 0.0 23.2 57.9 -1.2 12.4 9.8 5.4 15.5 6.7 10.6 7.3 28.4 7.7 50.9 16.0 766.9 5.9 19.3 7.3 6.5 4.4 6.4 -3.4 18.4 7.8 8.8 6.6 11.5 27.1 5.3 8.4 380.8 386.1 818.3 -7.0 18.8 -0.9 11.8 2.5 8.9 -13.2 22.7 -2.7 20.5 3.5 11.5 312.8 505.5 15.9 17.5 24.7 16.2 29.1 19.8 608.8 15.7 -0.4 58.1 25.0 10.2 59.0 31.6 24.3 46.4 26.3 21.6 35.7 24.4 20.0 32.0 9.9 -5.5 39.8 404.2 260.9 143.3 17.4 50.0 -4.4 11.1 18.4 4.9 8.1 41.8 -0.4 4. Currency 5. Demand deposits 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 3 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, plus 4 MMDAs, NSA Small time deposits Thrift institutions Savings deposits, SA, plus 4 MMDAs, NSA Small time deposits M3 minus M25 Large time deposits 6 At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA -MEMORANDA: 23. Managed liabilities at commercial banks (24+25) Large time deposits, gross 24. 25. Nondeposit funds Net due to related foreign 26. institutions, NSA 7 Other 27. 28. Average monthly change 5.3 0.1 5.2 4.6 2.0 2.6 3.2 2.1 1.9 0.6 9.7 15.3 -29.3 135.6 31.5 -54.7 140.2 47.0 28.7 162.1 58.3 69.0 81.4 in billions of dollars -- 440.2 318.4 121.8 0.9 -1.8 -0.4 2.9 2.2 0.8 0.6 5.4 -32.4 154.2 U.S. government deposits at commercial 8 -1.2 1.2 -1.3 1.2 -8.2 8.7 1. Quarterly growth rates are computed on a quarterly average basis. Dollar amounts shown under memoranda for quarterly changes are calculated on an end-month-of-quarter basis. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks plus overnight Eurodollar deposits issued by branches of U.S. banks to U.S. nonbank customers, both net of amounts held by money market mutual funds. Excludes retail RPs, which are in the small time deposit component. 4. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (MMDAs). not seasonally adjusted. Commercial bank savings deposits excluding MMDAs declined during October and November at rates of 6.7 and 4.8 percent respectively. At thrift institutions, savings deposits excluding MMDAs decreased in October and November at rates of 5.5 and 4.2 percent respectively. 5. The non-M2 component of M3 is seasonally adjusted as a whole. 6. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 7. 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 and unaffiliated foreign banks), loans sold to affiliates, loan RPs and other minor items. Data are partially estimated. 8. Consists of Treasury demand deposits at commercial banks and Treasury note balances. p--preliminary. banks 9 SELECTED FINANCIAL MARKET QUOTATIONS1 (Percent) 1982/1983 Cyclical low 1984 highs FOMC Oct. 2 1984 InterFOMC meeting Nov. 7 low Dec.13 Change from: 1984 FOMC highs Nov. 7 Short-term rates 2 8.42 11.63 10.60 9.80 Treasury bills 3-month 6-month 1-year 7.08 7.62 7.73 10.67 10.77 11.13 10.25 10.35 10.39 8.55 8.86 9.11 Commercial paper 1-month 3-month 8.00 7.97 11.42 11.35 10.83 10.79 Large negotiable CDs 3 1-month 3-month 6-month 8.08 8.13 8.20 11.52 11.79 12.30 8.68 8.71 8.92 -2.71 -. 88 8.45 8.67 8.29 8.45 8.78 -2.38 -2.32 -2.35 -.26 -.41 8.99 9.05 8.52 8.58 8.62 8.67 -2.80 -2.68 -.37 -.38 10.94 11.11 11.29 9.13 9.23 9.39 8.61 8.72 8.88 8.71 8.81 9.03 -2.81 -2.98 -3.27 -.42 -.42 -.36 11.89 12.20 11.09 11.41 9.60 9.75 8.84 -- 8.88 9.14 -3.01 -3.06 -.72 -. 61 10.50 13.00 12.75 12.00 11.25 -1.75 -.75 9.05 10.86 12.57 13.20 10.59 11.43 9.16 10.23 8.56 9.67 8.69 9.93 -3.88 -3.27 -.47 -.30 U.S. Treasury (constant maturity) 9.33 13.49 3-year 10-year 10.12 13.99 10.27 13.94 30-year 12.29 12.54 12.35 11.05 11.72 11.63 10.56 11.24 11.32 10.72 11.70 11.67 -2.77 -2.29 -2.27 -.33 -.02 Municipal revenue (Bond Buyer index) 10.44 -1.00 -.18 12.93e -2.37 -. 16 Federal funds Eurodollar deposits 1-month 3-month - -.33 4 Bank prime rate Treasury bill futures Mar. 1985 contract Dec. 1985 contract - Intermediate- and long-term rates Corporate--A utility Recently offered Home mortgage rates S&L fixed-rate FNMA ARM, 1-yr. 9.21 11.44 10.655 10.62 11.64 15.30 13.90e 13.09e 12.55 10.49 1982 14.68 13.70 1983 14.266 12.906 ----FOMC Oct. 2 13.746 11.556 1984 ---FOMC Nov. 7 Lows Highs Stock prices Dow-Jones Industrial 776.92 1287.20 1191.36 NYSE Composite 58.80 99.63 94.38 AMEX Composite 118.65 249.03 212.77 NASDAQ (OTC) 159.14 328.91 246.10 1. One-day quotes except as noted. 2. Averages for two-week reserve maintenance pe riod closest to date shown. Last observation is for maintenance period ended December 5, 1984. 3. Secondary market. 12.77 -.04 - 13.206 -1.48 -.54 11.056 -2.65 -.50 Percent change from: FOMC FOMC Dec. 13 Oct. 2. Nov. 7 1233.22 1168.84 -1.9 -5.2 97.46 93.42 -1.0 -4.1 212.29 200.40 -5.8 -5.6 249.75 238.08 -3.3 -4.7 4. Averages for statement week closest to date shown. 5. One-day quotes for preceding Thursday. 6. One-day quotes for preceding Friday. e--estimated. 10 December 14, 1984 COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 19842 Q1 L Q2 Q3 Sept. Oct. 7 Nov.P Levels in bil. of dollars Nov.P Commercial Bank Credit ----------------------- 1. Total loans and securities 3 at banks 2. Securities 3. Treasury securities 4. Other securities 5. Total loans 13.9 7.2 4.4 -9.2 -2.3 3 3 -11.1 8.1 7.3 4.4 0.8 4.4 7.4 12.1 1712.5 -2.5 3.6 43-.9 -7.1 -5.9 3.9 183.4 3.3 251.5 9.5 -7.9 4.5 6.7 -0.5 17.5 13.1 9.4 9.5 10.9 15.0 1277.7 18.9 17.1 7.7 3.5 10.1 8.5 470.3 -38.5 19.7 177.6 89.1 52.4 28.7 6. Business loans 7. Security loans -4.4 8. Real estate loans 13.4 14.5 11.3 11.1 11.0 11.6 376.5 9. Consumer loans 21.5 21.6 14.8 8.6 10.0 16.9 258.7 Short- and Intermediate-Term Business Credit ----------- 10. Business loans net of bankers acceptances 18.2 18.2 17.3 17.3 8.0 5.1 10.1 9.2 by nonCommercial paper issued 4 financial firms 22.8 67.1 43.8 32.3 70.3 54.1 71.8 12. Sum of lines 10 & 11 18.7 22.5 12.0 8.6 17.1 14.9 532.8 13. Line 12 plus loans at foreign 5 branches 18.5 22.5 11.7 7.0 15.6 15.8 553.1 -22.2 45.4 -36.48 n.a. n.a. 11. 6 14. Total bankers acceptances outstanding 15. Line 13 plus total bankers acceptances outstanding 16. 17. Finance company loans to business Total short- and intermediateterm business credit (sum of lines 15 and 16) 6 -11.8 -26.7 461.0 12.9 25.3 8.6 2.8 28.8 8.4 12.9 13.8 n.a. n.a. 9.2 4.2 n.a. n.a. 15.1 22.9 9.18 n.a. n.a.--not available. p--preliminary. 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. firms by foreign branches of domestically chartered banks. 6. Based on average of current and preceding ends of month. 7. Growth rates for total loans and investments, total loans, business loans, and real estate loans have been adjusted to eliminate effects of loan reclassifications and of loan transfers from Continental Illinois National Bank to the FDIC. 8. Reporting panel change in October 1984 reduced reported acceptances by $400 million. Growth rates have been adjusted to eliminate this break in series. INTERNATIONAL DEVELOPMENTS On December 13 the German Bundesbank announced its monetary target for 1985. Central Bank Money is targeted to grow between 3 and 5 percent from the fourth quarter of 1984 to the fourth quarter of 1985. The target for 1984 is 4 to 6 percent. November has been 4.7 percent. CBM growth through In a comment, the Bundesbank said that the new target accommodates continued money growth at the current rate and does not represent a change in monetary policy. On December 14 the Swiss National Bank announced that its monetary target for 1985 would be 3 percent growth in adjusted central bank money, unchanged from the 1984 target. It appears that actual money growth this year will be slightly below target, with adjusted central bank money up 2.4 percent through September. 

Federal Reserve (1984, December 17). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19841218_part1

@misc{wtfs_greenbook_19841218_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1984},
  month = {Dec},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19841218_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}