Greenbook/Tealbook

CONFIDENTIAL (FR) CLASS III - FOMC March 22, 1985 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 New Orders and Shipments . . . . . . . . . . . . . . . . . . . Consumer Price Index . . . . . . . . . . . . . . . . . . . . . Errata . . . . .. . . . . . . . . . . . . . . . . . . . .. Tables Business capital spending . . . . Recent changes in consumer prices . . . . . . . . . . . . . . . . . . . . . . . . . . THE DOMESTIC FINANCIAL ECONOMY Tables Monetary aggregates . . . . . . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . . . . . SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY New Orders and Shipments New orders for nondefense capital goods rose 29.6 percent in February, after a 13.1 percent decline in January. As a result, the average level of new orders in January and February exceeded the fourth-quarter figure by about 1 percent. Much of the February increase stemmed from a 158 percent jump in orders for office and computing equipment; this surge followed two months of extremely weak orders during December and January. A sharp rise in orders for aircraft and parts also contributed to the February increase. In the remaining categories of equipment, new orders rose about 2 percent in February. Shipments of nondefense capital goods increased 2.4 percent in February, after dropping 10.6 percent in January. For January and February combined, shipments averaged about 5-1/2 percent below their level in the fourth quarter of 1984. In February, shipments increased for most types of equipment, led by a 12.5 percent gain in aircraft and parts. For the remaining categories of equipment, shipments rose 1.1 percent. Consumer Price Index The consumer price index rose 0.3 percent in February as sharp declines in prices of petroleum products offset a pickup in price increases for food and other commodities. Food prices were up 0.5 percent, reflecting the weather-related shortages of many fresh fruits and vegetables. Excluding food and energy items, the index advanced 0.6 percent with large increases in the prices of new and used cars, as well as apparel and housefurnishings. 2 Price increases for commodities other than food and energy averaged more than 0.6 percent per month in January and February, after showing little change in the fourth quarter. In contrast, service prices, excluding energy, rose 0.4 percent for the third consecutive month. Errata Page 11-16 of the Greenbook indicates that the merchandise trade deficit in January was $21 billion at an annual rate. is $121 billion at an annual rate. The correct figure BUSINESS CAPITAL SPENDING INDICATORS (Percentage change from preceding comparable period; based on seasonally adjusted data) Q3 Q4 1984 Nov. Dec. 1985 Jan. Feb. Producers' durable equipment Nondefense capital goods Shipments Orders Unfilled orders Imports of capital goods excluding autos 2.7 -1.1 1.7 3.6 -3.5 -2.5 23.1 -17.9 2.8 6.9 -.1 5.1 -1.9 -1.5 -10.6 -13.1 -1.9 1.0 -3.9 22.1 n.a. 2.4 29.6 2.8 Exports of capital goods excluding autos 1.4 2.3 -8.5 12.1 .0 n.a. Sales of heavy-weight trucks (thousands of units, A.R.) 252 316 345 348 299 316 1.3 1.9 4.9 10.9 1.3 2.1 2.5 3.9 2.7 5.0 n.a. n.a. Nonresidential structures Nonresidential construction Commercial building RECENT CHANGES IN CONSUMER PRICES (Percentage change; based on seasonally adjusted data)¹ Relative Importance Dec. 1984 1983 1984 HI 1984 Q3 -Annual All items² Food Energy All items less food and energy³ Commodities³ Services 3 Memorandum: CPI-W 4 1985 Q4 rate- Jan. -Monthly Feb. rate-- 100.0 18.7 11.5 3.8 2.6 -.5 4.0 3.8 .2 4.3 3.8 .8 4.5 3.9 .1 3.0 3.7 -.7 .3 .4 -.2 .3 .5 -1.4 69.8 26.3 43.5 4.9 5.0 4.8 4.7 3.1 5.6 5.0 3.8 5.6 5.3 3.8 6.2 3.5 .9 5.0 .3 .2 .4 .6 .8 .4 100.0 3.3 3.5 2.6 7.5 1.6 .3 .4 1. Changes are from final month of preceding period to final month of period indicated. 2. Official index for all urban consumers, based on a rental equivalence measure for owner-occupied housing after December 1982. 3. Data not strictly comparable. Before 1983, they are based on unofficial series that exclude the major components of homeownership; beginning in 1983, data include a rental equivalence measure of homeowners costs. 4. Index for urban wage earners and clerical workers, based on a rental equivalence measure for owner-occupied housing after December 1984. MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted)¹ Q3 Q2 -1. 2. 3. - 1985 Dec. Jan. Feb. 1985 Growth from Q4 1984 to Feb. 1985 Percentage change at annual rates 4.5 6.8 9.5 M1 M2 M3 1984 Q4 March 22, 3.2 9.0 11.0 10.2 13.1 14.4 9.0 13.6 10.1 14.1 10.5 7.9 Levels in billions of dollars Feb. 1985 Selected components 4. Currency 7.5 7.3 5.1 6.1 5.3 9.0 160.6 5. Demand deposits 3.3 0.3 -1.0 8.8 2.4 12.5 251.7 6. Other checkable deposits 9.0 8.5 16.7 24.7 22.6 151.7 7. M2 minus M1² 7.2 7.6 10.8 14.1 15.1 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money 15.5 market mutual fund shares, NSA 9.0 Commercial banks Savings deposits, SA, plus 4 5.1 MMDAs, NSA 13.1 Small time deposits 8.7 Thrift institutions Savings deposits, SA, plus 4 2.3 MMDAs, NSA 13.4 Small time deposits 2.8 2.1 -10.3 106.2 126.3 69.3 10.9 4.9 28.3 8.6 42.2 17.7 32.2 15.0 22.3 9.2 175.4 792.4 -3.6 13.4 4.7 10.6 6.9 7.3 28.0 7.8 9.4 38.2 -8.1 7.4 25.7 -8.4 6.5 410.7 381.7 821.4 -12.5 17.0 -4.1 14.8 6.5 11.4 23.7 -3.1 25.9 -6.0 327.1 494.3 24.9 20.3 18.9 18.8 -2.5 620.9 30.4 21.8 48.1 25.7 19.3 38.1 18.8 12.2 31.3 16.3 3.6 39.0 1.4 -9.5 20.5 6.6 9.1 2.3 419.6 264.3 155.3 44.0 -82.6 -27.4 -51.7 16.6 7.4 62.2 65.8 81.8 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 11.3 3 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 8.1 54.2 7.1 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 7 Other 27. 9.7 33.4 -22.1 97.4 39.6 -23.0 90.6 -17.0 19.0 1850.1 Average monthly change in billions of dollars - 1.0 -0.9 4.2 1.8 2.4 4.2 3.5 0.7 -0.6 2.8 -3.4 -7.4 -1.0 -6.4 -0.4 2.8 1.0 -0.4 1.1 -4.5 -4.5 -1.8 11.9 0.5 11.4 438.9 325.3 113.6 -33.1 146.7 U.S. government deposits at commercial 0.6 0.0 -1.2 -1.4 banks 8 -0.7 13.0 1. Quarterly growth rates are computed on a quarterly average basis. Dollar mounts 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 January and February 1985 at rates of 9.8 and 2.0 percent respectively. At thrift institutions, savings deposits excluding MMDAs increased in January and February 1985 at rates of 7.2 and 8.6 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, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits at commercial banks and Treasury note balances. 28. COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)¹ Q2 Q3 1984 Q4 ------------- 1. 2. Total loans and securities at banks Securities 3. U.S. government securities 4. Other securities 5. Total loans Dec. 1985 Feb. Jan. Levels in bil. of dollars Feb. Commercial Bank Credit --------------------- 9.2 9.5 9.8 9.6 6.2 13.0 1742.0 -9.8 6.6 0.5 -1.2 6.3 12.8 406.8 -11.2 6.8 3.4 3.7 -1.4 26.3 265.6 -7.3 6.3 -4.8 -10.2 20.5 15.7 10.5 12.7 12.9 6.0 13.1 1335.2 13.3 474.1 -11.8 141.2 6. Business loans 18.5 7.5 7.7 2.3 1.5 7. Security loans -13.6 4.2 36.1 47.7 19.1 8. Real estate loans 13.8 11.4 11.6 11.6 7.7 13.3 381.8 9. Consumer loans 21.5 14.2 16.2 20.9 16.7 16.5 258.1 -11.3 31.6 Short- and Intermediate-Term Business Credit -------10. Business loans net of bankers acceptances 2 18.4 7.9 21.5 8.2 7.8 4.1 2.1 40.8 45.1 -86.9 20.5 5.7 3.9 5.9 490.2 -41.0 37.3 72.9 9.9 563.1 11. Loans at foreign branches 12. Sum of lines 10 & 11 18.7 7.8 13. Commercial paper issued by 3 nonfinancial firms 64.8 46.8 51.2 23.4 14. Sums of lines 12 & 13 23.3 12.2 13.7 8.0 15. Total bankers acceptances outstanding 16. Line 14 plus total bankers acceptances outstanding 26.4 8.3 7.7 17. 4 5 Finance company loans to business , 15.2 9.8 18. Total short- and intermediateterm business credit (sum of lines 16 & 17) 24.5 8.5 4 47.0 -16.1 26.0 8.7 -32.0 -1.9 10.3 469.7 -49.8 n.a. 71.6 (Jan.) 3.6 -7.6 n.a. 630.1 (Jan.) 23.2 25.8 32.5 n.a. 136.5 (Jan.) 10.3 7.4 -0.6 n.a. 766.6 (Jan.) -28.2 n.a.-not available. p--preliminary. 1. Average of Wednesdays for domestically chartered banks and average of current foreign-related institutions. and preceding ends of months for 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Average of Wednesdays. 4. Based on average of current and preceding ends of month. 5. Reporting panel change in January, 1985 increased reported acceptances $2.1 billion. Growth rates have been adjusted to eliminate this break in series. 7 SELECTED FINANCIAL MARKET QUOTATIONS¹ (Percent) Cyclical low 1985 1984 1982/1983 Highs FOMC Dec. 18 FOMC Feb. 13 Mar. 21 Change from: 1984 FOMC highs Feb. 13 Short-term rates Federal funds 2 8.46 11.63 8.34 8.52 8.58 -3.05 Treasury bills 3-month 6-month 1-year 7.08 7.62 7.73 10.67 10.77 11.13 7.81 7.98 8.30 8.24 8.30 8.49 8.44 8.84 9.03 -2.23 -1.93 -2.10 Commercial paper 1-month 3-month 8.00 7.97 11.42 11.35 8.06 8.13 8.47 8.56 8.64 8.78 -2.78 -2.57 8.08 8.13 8.20 11.52 11.79 12.30 8.18 8.29 8.47 8.51 8.70 9.05 8.64 8.88 9.41 -2.88 -2.91 -2.89 8.68 8.71 11.89 12.20 8.53 8.79 8.60 9.04 8.89 9.33 -3.00 -2.87 10.50 13.00 11.25 10.50 10.50 -2.50 10.11 10.86 12.82 13.20 8.66 9.43 8.77 9.64 9.05 9.82 -3.77 -3.38 U.S. Treasury (constant maturity) 3-year 9.33 13.49 13.99 10-year 10.12 10.27 13.94 30-year 10.24 11.29 11.35 10.44 11.39 11.31 11.02 11.82 11.77 -2.47 -2.17 -2.17 Municipal revenue (Bond Buyer index) 9.21 11.44 10.445 9.965 10.24 -1.20 Corporate--A utility Recently offered 11.64 15.30 12.80e 12.65e 13.2 4 e -2.06 12.55 n.a. 1982 14.68 12.31 1983 13.186 11.076 1984 FOMC 12.90 10.59 13.206 10.876 1985 Large negotiable CDs 3 1-month 3-month 6-month Eurodollar deposits 4 1-month 3-month Bank prime rate Treasury bill futures June 1985 contract Dec. 1985 contract .06 .17 .22 .29 .29 - .28 .18 Intermediate- and long-term rates Home mortgage rates S&L fixed-rate S&L ARM, 1-yr. Lows Highs Dec. 18 Stock prices 1211.57 776.92 1287.20 Dow-Jones Industrial 96.78 99.63 58.80 NYSE Composite 204.00 249.03 118.65 AMEX Composite 243.44 159.14 328.91 NASDAQ (OTC) 1. One-day quotes except as noted. 2. Averages for two-week reserve maintenance period Last observation is for closest to date shown. maintenance period ended March 13, 1985. 3. Secondary market. FOMC Feb. 13 Mar. 21 .59 .30 -1.48 -1.44 .28 Percent change from: FOMC FOMC Dec. 18 Feb. 13 -2.3 4.7 1268.22 1297.92 -2.1 7.3 103.85 106.08 -2.7 10.2 224.89 231.22 14.6 -3.2 279.03 288.32 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. 

Federal Reserve (1985, March 25). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19850326_part1

@misc{wtfs_greenbook_19850326_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1985},
  month = {Mar},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19850326_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}