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 June 24, 1988 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS THE DOMESTIC NONFINANCIAL ECONOMY Page Revised estimate of real GNP.................. Personal income and consumption............... 1 1 Tables Real Gross National Product and related items. Personal income................................. Nominal personal consumption expenditures..... Sales of automobiles and light trucks......... 3 4 5 6 THE FINANCIAL ECONOMY Banking and monetary aggregates.............. 7 Tables Monetary aggregates........................... Commercial bank credit and short- and intermediateterm business credit........................ Selected financial market quotations.......... 8 9 10 SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Revised estimate of Real GNP Real GNP growth for the first quarter of 1988 is now estimated to have been 3.6 percent at an annual rate, fractionally lower than reported earlier. Real personal consumption expenditures were revised down $3 billion owing to a lower estimate of spending on motor vehicles and parts. New estimates of net purchases of farm products by the Commodity Credit Corporation caused a downward revision to federal government nondefense purchases, along with an offsetting upward adjustment to farm inventories. The increase in the GNP fixed-weight price index, 3.7 percent at an annual rate, was little changed from the earlier estimate. in the GNP deflator However, the rise was lowered to 1.4 pertent at an annual rate, owing mainly to shifts in the composition of inventories. Personal income and consumption Total personal income advanced $13-1/4 billion in May, a bit below the average pace during the first four months of this year. Increases in wages and salaries were well maintained and accounted for nearly all of the overall rise in income. Disposable income was up substantially in May as the level of personal tax payments, which had risen sharply in April owing to an increase in federal nonwithheld income tax payments, fell back to about its March level. Nominal disposable income has risen about 6-1/2 percent at an annual rate over the first five months of the year; in real items, disposable income probably grew at about a 2 percent annual pace. Nominal personal consumption spending rose nearly $16 billion in May, boosted by greater expenditures on nondurable goods and for services. Revisions to earlier months raised outlays in April, but reduced spending in February and March. In real terms, the staff now estimates that consumption increased about 1-3/4 percent at an annual rate over the first five months of the year. The personal saving rate, which had dropped in April owing to the decline in disposable income, moved up to 4.5 percent in May, similar to its first-quarter level. Sales of new domestic motor vehicles rebounded in the second ten-day selling period of June. As a result, auto sales through June 20 averaged 7.4 million units at an annual rate, and sales of light trucks averaged 4.2 million units. In both cases, sales appear to be holding at about the same pace as in April and May despite some cutbacks in incentive programs. REAL GROSS NATIONAL PRODUCT AND RELATED ITEMS (Percent change from previous period at compound annual rates; based on seasonally adjusted data) 1986-Q4 to 1987-Q4 1987-Q4 1988-Q1 Previous Revised 1. Gross national product 1a. Gross domestic product 1b. Gross domestic purchases 4.0 4.1 3.4 4.8 4.4 4.3 3.9 4.3 2.1 3.6 4.4 1.9 2. Final sales 2a. Excluding CCC purchases 2.0 2.5 .9 -. 1 4.5 6.3 3.6 5.8 3. Consumer spending 3a. Excluding motor vehicles 1.0 1.6 -2.5 .6 4.3 3.5 3.8 3.3 4. Business fixed investment 4a. Producers' durable equipment 5.1 5.4 -. 9 20.8 32.8 21.0 33.1 -2.6 7.4 -9.4 -8.8 .9 5.9 -12.9 14.1 92.7 -21.2 -4.3 -62.3 -25.7 -5.6 -70.6 3.3 5.5 1.5 1.7 5. Residential structures 6. Federal purchases 6a. Defense 6b. Nondefense 1.6 -. 9 7. State and local purchases 8. Exports of goods and services 16.8 15.9 20.7 22.8 9. Imports of goods and services 9.1 9.9 3.4 5.9 60.5 51.5 9.0 55,4 37.6 17.8 61.0 39.4 21.6 ADDENDA: 42.9 2 32.5 2 10.4 2 10. Inventory change 1 10a. Nonfarm 1 10b. Farm 1 11. Net exports 1 12. Nominal GNP 7.5 7.6 5.4 5.1 13. GNP implicit price deflator 3.3 2.7 1,7 1.4 14. GNP fixed-weighted price index 4.0 3.6 3.6 3.7 15. Disposable personal income 2.2 6.0 3.9 3.5 16. Saving rate (percent) 3.7 2 4.8 4.7 4.7 1. Level. billions of constant dollars. 2. Annual average. -135.5 2 -135.8 -119.1 -120.3 PERSONAL INCOME (Average monthly change at an annual rate; billions of dollars) 1986 Total personal income 14.2 1987 1988 Q4 Q, 21.3 28.6 22.5 45.6 4.1 13.3 13.8 11.1 14.7 12.5 16.4 14.5 11.8 9.9 12.2 10.2 1987 1988 Mar.r Apr.r Wages and salaries Private 7.5 5.6 12.2 9.8 Other labor income .7 .8 .8 .5 Proprietors' income Farm 2.6 .5 2.5 .2 4.8 2.6 5.6 3.9 Rent, dividends and interest 1.7 4.9 8.6 -.8 Transfer payments 2.5 2.0 1.6 .8 1.0 3.2 3.7 Equals: Disposable personal income 11.0 17.7 23.8 23.4 35.5 -32.8 Memo: Real disposable income 6.3 4.9 14.8 11.7 16.7 -44.0 Less: Personal contributions for social insurance Less: Personal tax and nontax payments r--Revised. p--Preliminary. Map m .5 .5 -8.5 -11.9 -.7 -2.4 .3 1.1 .8 7.8 7.3 .0 1.3 .9 5.4 1.1 4.9 -.9 10.1 .5 22.1 19.4 36.9 -35.2 48.5 NOMINAL PERSONAL CONSUMPTION EXPENDITURES (Percent change from preceding period) 1986 1987 1987 Q4 -- Annual Personal consumption expenditures Durable goods Excluding motor vehicles 5.9 5.7 13.3 11.3 -1.6 .5 1.5 -20.1 -3.4 1988 Q1 1988 Mar. Apr. -- Monthly rate-- rate-6.2 .7 .4 .5 11.1 -.2 1.9 -.4 1.4 -. 5 .8 .6 Nondurable goods Excluding gasoline 1.8 4.9 5.0 3.8 2.7 3.3 Services Excluding energy 6.6 7.5 8.3 9.0 7.4 8.4 .5 .7 4.1 1.0 -2.5 .3 -. 2 4.3 3.7 4.8 5.0 3.6 Memo: Real personal consumption expenditures Personal saving rate (percent) May 2.2 4.7 4.5 SALES OF AUTOMOBILES AND LIGHT TRUCKS (Millions of units at an annual rate, FRB seasonals) 1987 1988 1988 Q3 Q4 Ql1 Apr. May June 1-20 Autos and light trucks Autos Light trucks 16.4 11.4 5.0 14.7 10.0 4.7 15.6 10.8 4.8 15.1 10.5 4.6 15.8 10.7 5.1 n.a. n.a. n.a. Domestically produced1 Autos Light trucks 11.9 7.8 4.1 10.5 6.6 3.9 11.8 7.6 4.2 11.2 7.2 4.0 12.1 7.6 4.4 11.6 7.4 4.2 Imports 4.5 4.1 3.8 3.9 3.7 n.a. Autos 3.6 3.4 3.1 3.3 3.1 n.a. Japanese Korean European Light trucks 2.4 .5 .7 .9 2.4 .3 .7 .8 2.1 .5 .6 .6 2.2 .5 .5 .6 2.1 .4 .5 .6 n.a. n.a. n.a. n.a. Memo: Auto production 6.3 7.0 6.2 7.0 7.5 7.6e 1. Includes vehicles produced in Canada and Mexico for General Motors, Ford, and Chrysler. n.a.--not available. e--estimate as of June 24. THE FINANCIAL ECONOMY Banking and Monetary Aggregates Partial data through June 20 indicate a rebound in growth of the monetary aggregates from May's pace, which was depressed by runoffs of tax-related balances. Expansion in M1 and M2 in June is estimated to pick up to 7 and 6 percent annual rates, respectively. The acceleration in M1 reflects a turnaround in demand deposit growth and somewhat faster OCD expansion. The pickup in M2 is smaller than that of M1 owing to a slowdown in the nontransactions component. M3 is now estimated to accelerate to a 7 percent pace, with a marked pickup in large time deposit growth, which is occurring entirely at commercial banks. Data from large, weekly reporting banks through June 15 suggest continued strength in bank credit. Holdings of securities expanded at a much stronger pace in early June, as these banks made sizable additions to their trading accounts. Real estate loans continued growing at a robust pace in the first half of June. Consumer loan growth picked up moderately from May's pace, which was depressed by large issuances of consumer loan-backed securities. Expansion in business loans at all large banks moderated, but still maintained a double-digit pace through mid-June. However, commercial paper of nonfinancial businesses ran off and growth in the sum of business loans and commercial paper slowed to a moderate rate from the very rapid pace of recent months. MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted) 19871 -----------1. 2. 3. 1988 Q1 1988 Q2p 1988 May 1988 Jun p Growth Q4 87Jun 88p Percent change at annual rates--------------------- MH M2 M3 5-3/4 8 7 ---------- 1988 Apr Percent change at 11.2 9.9 7.1 5 7-1/4 7 Levels bil. $ May 88 annual rates---------- Selected components 4. M1-A 5. Currency 6. Demand deposits 7. Other checkable deposits 8. M2 minus M12 9. 10. Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks 3 Savings deposits, SA, plus MMOAs, NSA Small time deposits Thrift institutions 3 ' Savings deposits, SA, plus MMOAs, NSA Small time deposits 11. 12. 13. 14. 15. 16. 17. M3 minus M24 18. 19. 20. 21. 22. 23. Large time deposits s At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA 2.8 1.4 3-1/2 9.2 -4.1 6 498.2 8.7 -1.0 9.4 -4.4 8-1/4 1/4 9.6 9.2 6.5 -11.6 6 6 203.6 287.3 8.5 10-1/4 14.4 7.1 8 271.9 7.7 8-3/4 9.4 6.4 5 2233.6 -12.8 9-3/4 32.1 75.0 22 81.6 19.3 7.2 2.7 13.7 8.7 -7.3 21.3 4-1/4 7 3-1/4 12 9-1/4 2-1/2 14 6.1 6.8 0.9 15.1 9.5 3.6 13.6 -17.3 1.0 -3.1 6.6 6.2 0.9 -17 10 11 8 4 5 3 232.7 947.5 542.9 404.7 969.0 401.9 567.1 11 776.4 13.6 4.1 10.2 10.8 7.9 4 8.5 11.2 3.4 7.3 3.2 15.7 7-1/2 7 8-3/4 2.9 -3.3 15.3 9.5 11.4 6.5 496.5 328.5 168.1 3.0 29.9 13.8 44.0 3.4 -23.9 -31 10 14-1/4 -67.8 8.9 -13.4 -24.8 34.4 13.6 90.0 111.2 89.5 ----- Average monthly change in billions of dollars---MEMORANDA: 6 24. Managed liabilities at commercial banks (25+261 25. Large time deposits, gross 26. Nondeposit funds Net due to related foreign 27. institutions, NSA 7 Other 28. deposits at commercial 29. U.S. government 8 banks 6.1 3.5 2.6 0.8 2.3 -1.5 7 1-1/4 5-3/4 5.1 -2.0 7.1 2.9 -0.3 -6.5 5.1 4-3/4 1 4.8 2.1 0.3 -0.4 -1 -3.1 586.9 396.5 190.4 12.9 2.4 10.5 1 -1 8.8 181.6 -3 24.7 1. Amounts shown are from fourth quarter to fourth quarter. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. Commercial bank savings deposits excluding MMDAs grew during May and June at rates of 11.7 percent and 14 percent, respectively. At thrift institutions, savings deposits excluding MMDAs grew during May and June at rates of 3.5 percent and 7 percent, respectively. 4. The non-M2 component of M3 is seasonally adjusted as a whole. 5. Net of large denomination time deposits held by money market mutual funds and thrift institutions. 6. Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. 7. Consists of borrowing from other than commercial banks in the form of federal funds purchased, securitites sold under agreements to repurchase, and other liabilities for borrowed money (including borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits and note balances at commercial banks. p - preliminary COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data) 1986:Q4 to 1987 1 987:Q4 Q4 Levels bil.$ 1988 1Q Mar. Apr. May May -------------------- Commercial Bank Credit ----------------------1. 2. Total loans and securities at banks 7.9 2.5 7.8 7.9 11.4 13.0 2322.5 Securities 5.0 3.1 5.4 13.3 10.7 5.3 543.6 3. U.S. government securities 9.1 2.2 6.8 14.3 14.5 10.5 346.0 4. Other securities 1.3 4.7 2.9 11.7 4.3 -3.6 197.6 8.8 2.3 8.6 6.3 11.6 15.4 1778.9 5. Total loans 6. Business loans 7.5 4.7 2.7 -3.6 17.5 17.6 587.4 7. Security loans 1.0 -110.2 76.6 -43.6 -51.3 22.0 38.8 8. Real estate loans 1 8.1 13.2 10.8 10.5 12.8 16.1 612.5 9. Consumer loans 4.9 4.5 10.4 13.8 10.8 5.7 339.2 Other loans 2.3 -12.2 4.5 21.7 5.4 21.8 201.0 LO. ------Business loans net of bankers acceptances 2 12. Loans at foreign branches 13. Sum of lines 11 A 12 14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 & 14 16. Bankers accetances: -4.2 17.8 18.2 583.9 92.3 -12.2 61.9 20.4 5.2 -1.4 16.8 20.0 604.4 23.9 8 8 40.6 16.2 28.0 92.0 6.7 5.7 4.1 16.5 20.9 696.3 -24.9 33.1 18.7 729.3 5.4 2.3 -: 35.9 115.8 7.2 4.1 -1.6 6.0 7.6 -4.1 U.S. trade related'- 17. Short- and Intermediat-i'-rm Business Credit --------- Line 15 plus bankers acceptances: U.S. trade related 13.3 6.3 -11.6 3.6 6.7 4.9 4.1 16.3 7.1 7.1 18. Finance company loans to business 3 16.6 24.1 8.4 9.5 15.6 n.a. 217.55 19. Total short- and intermediateterm business credit (sum of lines 17 & 18) 10.5 5.6 5.2 16.0 n.a. 935.75 8.4 1. Average of Wednesdays. irms by foreign branches of domestically chartered banks 2. Loans at foreign branches are loans made to U.S. f: 3. Based on average of data for current and preceding ends of month. 4. Consists of acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of good. 5. April data. n.a.--not available ---preliminary SELECTED FINANCIAL MARKET QUOTATIONS 1/ (percent) 1987 Jan-Feb lows Change from: 1988 2/ Oct 16 Feb FOMC 2/ los May 17 June 23 Oct 16 FOMC May 17 Sbhrt-tem rates Federal tunds 3/ 0.47 5.95 7.59 6.38 7.07 7.54 -0.05 3-unth 5.30 7.74 5.59 5.35 7.74 5.77 6.10 6.30 1-year 5.31 6.9 6.52 6.76 6.99 -0.41 0.22 -0.82 0.21 -0.75 0.10 5.81 5.73 7.94 8.65 6.41 6.45 7.09 7.20 7.41 7.50 -0.53 -1.15 0. 0. 5.85 5.80 5.78 7.92 6.44 6.49 6.55 7.07 7.27 7.51 7.44 7.53 7.69 -0.48 0.7 ELrodollar deposits 5/ l-nnth 3-mnth 6.00 7.79 8.69 6.69 6.60 7.09 7.5 7.61 -1.08 Bank prine rate 7.50 9.25 8.50 9.00 US. Treasry (constant maturity) 6.34 9.52 1 yar 10.23 7.01 7.28 8.25 Tremsry bills 4/ CamCial papr 1-nth 3-onth Lare neDptiable CD's 4/ T-nth 3-wath 9.12 6.00 7.34 -1.43 0.26: 0.18 0.25 0.45 9.00 -0.25 0.00 0.27 Intermediate- and lo-term rates 7.29 10.24 8.32 9.12 9.22 8.88 8.90 -1 -1.34 (BoPn BE r inder) 6.92 9.59 7.76 8.26 8.10 -1.49 Corporate-A utility O y offered 8.78 11.50 9.63 10.60 10.40 -1.10 -0.20 9.84 10.40 10.35 -1.23 0.05 -0.66 0.13 30-year Imcipal remume 6/ ase D rates 7/ hiNB-a r9.10 AIM, 1-ear 11.58 7.52 8.45 1986 .11 8.3;! 7.59 Record 7.79 Pervet oe 1988 1987 Tear end h~mgs 7.66 Low -0.16 FOeC P lay 17 Jue 23 eord 197 hia Ip tfri cC May 17 Stook prices DowJnes I SE Cpoite Mr Q ) tJ stral 18 .95 7Cite 7 .83 2722.42 1738.74 1986.41 2148.29 -1.09 187.99 125.91 14.65 1.03 -17.53 365.01 231.90 .82 -15. 296.57 .26 291.88 372.27 391.03 -1 1/ Onday quotes except as noted. 2/ Iast buani day prior to stock ariet deoline on Mnday Oct. 19, 1987. 3/ Awa fbrr to-wek reeve mintemoe period closest to date ao except lom abomc lih are on4ewek averames edizg Feb. 25 and Feb. 10, respectily. Last observatin I to date fbr miintwaoce period arning June 29, 1988. 2355 1 . 17 4 flet. r i 4/ Seandarr 5/ AverageB p 8.15 18 .13 5.04 bt cloet to date abom. 6/ QOne y ate fbr u . eek aur angng aveae 7/ QautesB Friday c1a0 t to date damx e-eatimte 

Federal Reserve (1988, June 29). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19880630_part2

@misc{wtfs_greenbook_19880630_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1988},
  month = {Jun},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19880630_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}