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) FOMC CLASS III July 1 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System 1994 TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Income and consumption . Inventories . . . . . . Construction . . . . . . . . . . .. . . . . . . . . . . . . .. . . . .... . . . . . . . . . . . .. . . . . . 1 2 2 . 4 . . . . . . . . . . . . 5 6 6 8 Tables Personal income. . . . . . . . . . . . . . . . . University of Michigan Survey Research Center: Survey of Consumer Attitudes . . . . . . . . Changes in manufacturing and trade inventories . Inventories relative to sales. . . . .. . . . . New construction put-in-place. . . . . . . . . . .. Chart Ratio of inventories to sales. . . . . . .. . . . . . 7 . . 9 10 THE FINANCIAL ECONOMY Tables Commercial bank credit and short- and intermediate. . . . . . . . . . . . . . term business credit . . . . . . Selected financial market quotations . SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Income and Consumption Nominal personal income rose $36.1 billion, or 0.6 percent in May, after an upward-revised increase of 0.6 percent in April. Private wages and salaries advanced $22 billion in May, while government wages and salaries were up $5.3 billion. Farm proprietors' income fell $5 billion, reflecting a drop in federal subsidy payments. Disposable personal income increased 1.2 percent in May, after no change in April. The large May advance reflected a $24 billion drop in personal tax and nontax payments. These payments had been boosted in April by retroactive tax payments associated with the 1993 Omnibus Budget Reconciliation Act. Excluding these payments, the increases in disposable income would have been 0.6-percent in both May and April. Real personal consumption expenditures rose 0.2 percent in May, after falling 0.6 percent in April. Outlays for durable goods dropped 1.4 percent last month, reflecting lower spending on motor vehicles; spending on durables excluding motor vehicles grew 0.3 percent. Outlays for nondurable goods edged up 0.1 percent in May, while spending on services increased 0.6 percent. The Michigan index of consumer sentiment fell slightly in June, and now stands about three points below its recent peak in January. By contrast, the preliminary June reading had shown a small improvement in sentiment during the first part of the month. The drop in the composite index last month reflected less optimistic views about future business conditions and less favorable appraisals of buying conditions for large household appliances. Respondents' assessments of their current personal financial situations were unchanged in June, while expectations of future personal financial -2situations improved moderately. Among question not included in the overall index, the index of home buying conditions slipped further in June to its lowest level in more than a year. Meanwhile, the index of car buying conditions edged up in June, and fewer households expected unemployment to increase over the coming year. Inventories Manufacturers' inventory investment picked up in May; factory stocks expanded at a $22.9 billion annual rate (current cost) last month, following accumulations of $10.5 billion in April and an average of $9.4 billion in the first quarter. As in April, the May inventory buildup was concentrated in only a few industries. particular, manufacturers of machinery In (both industrial machinery and electrical and electronic equipment) reported another sizable inventory accumulation ($9.8 billion), buildups over the past year. continuing the string of Outside of machinery, inventories held by producers of motor vehicles, fabricated metals and food products also expanded. With factory shipments up 0.5 percent from the April level, the manufacturers' inventory-shipments ratio was unchanged at 1.39 months at the end of May, close to the lowest level in recent years. Construction The total nominal value of new construction put in place rose 0.9 percent in May, as moderate gains were recorded in each of the three broad construction sectors. Residential construction spending rose for both single-family and multifamily projects. Despite some recent declines in starts, single-family expenditures have been supported by relatively high costs per start and by spending on projects started earlier. The increase in multifamily expenditures results largely from the recent pickup in starts, which in May reached their highest level in 3-1/2 years. Private nonresidential -3construction spending rose moderately in May, following a larger increase in April. Spending on public construction projects also advanced in May, reversing their decline a month earlier. -4PERSONAL INCOME (Average monthly change at an annual rate; billions of dollars) 1993 1993 1994 1994 Q3 Q4 Q1 Apr. May 3.4 22.3 35.8 29.9 35.6 36.1 Wages and salaries Private -8.3 -10.1 11.5 9.0 14.5 14.1 16.1 13.5 18.9 16.8 27.7 22.0 Other labor income 2.7 2.7 2.8 3.1 3.3 3.4 Proprietors' income Farm 3.9 1.6 .8 -1.1 15.9 10.9 .8 -1.1 5.4 4.2 -1.5 -5.0 Rent Dividend Interest 1.4 .3 .0 2.0 .4 1.9 -.7 .1 -. 5 4.1 .8 4.2 -1.4 2.4 2.5 .7 1.6 2.8 Transfer payments 4.7 3.9 4.8 3.9 5.7 3.2 1.1 3.2 1.3 1.8 Total personal income Less: Personal contributions for social insurance 1.2 .7 Less: Personal tax and nontax payments -.1 3.0 4.4 4.7 36.1 -24.0 Equals: Disposable personal income 3.5 19.4 31.4 25.1 -.5 60.2 -4.2 11.7 17.3 12.4 -9.9 38.9 Memo: Real disposable income REAL PERSONAL CONSUMPTION EXPENDITURES (Percent change from the preceding period) 1993 1993 Q3 1994 Q4 Q1 ------ Annual rate----Personal consumption expenditures 1994 Apr. May Monthly rate 3.2 4.4 4.4 5.2 -.6 .2 Durable goods Excluding motor vehicles 7.9 9.3 7.5 14.7 15.3 11.1 10.1 2.0 -1.1 .1 -1.4 .3 Nondurable goods Excluding gasoline 1.7 1.7 3.7 3.1 2.7 3.2 4.3 5.0 -.9 -1.2 .1 -.0 Services Excluding energy 2.9 3.0 4.0 3.1 2.6 2.8 4.5 4.4 -.3 -.1 .6 .3 4.0 3.8 4.0 3.5 3.9 Memo: Personal saving rate (percent) 4.7 July 1, 1994 UNIVERSITY OF MICHIGAN SURVEY RESEARCH CENTER: SURVEY OF CONSUMER ATTITUDES (Not seasonally adjusted) 1993 Oct 1993 Nov 1993 Dec 1994 Jan 1994 Feb 1994 Mar 1994 Apr 1994 May 1994 Jun (f) Composite of current and expected conditions 82.7 81.2 88.2 94.3 93.2 91.5 92.6 92.8 91.2 Current conditions Expected conditions 98.7 72.5 98.2 70.3 102.9 78.8 106.6 86.4 108.3 83.5 101.4 85.1 108.1 82.6 106.3 84.2 104.5 82.7 104 119 107 121 113 122 115 123 114 127 105 125 116 124 111 123 111 127 126 99 121 88 117 91 119 96 Indexes of consumer sentiment (Feb. 1966=100) Personal financial situation Now compared with 12 months ago* Expected in 12 months* Expected business conditions Next 12 months* Next 5 years* Appraisal of buying conditions Cars Large household appliances* Houses 132 151 170 139 147 172 144 153 174 148 162 174 155 167 176 147 158 176 150 164 170 143 165 167 144 160 161 Expected unemployment change - next 12 months 137 131 115 104 115 112 116 116 114 Expected inflation - next 12 months Expected inflation - next 5 to 10 years 4.0 4.8 3.6 4.5 3.8 4.8 3.5 4.8 3.7 4.7 4.4 5.4 4.5 5.0 3.9 4.6 4.1 4.8 Willingness to use credit Willingness to use savings * -- Indicates the question is one of the five equally-weighted components of the index of sentiment. (p) - Preliminary (f) -- Final Note: Figures on financial, business, and buying conditions are the percent reporting 'good times' (or 'better') minus the percent reporting 'bad times' (or 'worse'), plus 100. Expected change in unemployment is the fraction expecting unemployment to rise minus the fraction expecting unemployment to fall. CHANGES IN MANUFACTURING AND TRADE INVENTORIES (Billions of dollars at annual rates; based on seasonally adjusted data) 1993 Q3 1994 Q4 Q1 1994 Mar. Apr. May Current-cost basis Total Excluding auto dealers Manufacturing Total machinery Fabricated metal Wholesale Motor vehicles Excluding motor vehicles 16.1 23.5 -2.5 3.8 1.0 12.0 1.8 10.2 18.8 5.5 -13.1 4.5 -.8 6.1 1.6 4.5 17.2 14.6 9.4 10.8 -.9 1.8 -5.2 7.1 -14.8 -14.9 -3.6 9.4 -3.5 -12.5 -10.0 -2.5 22.8 23.8 10.5 11.1 1.2 10.4 5.8 4.6 n.a. n.a. 22.9 9.8 1.2 n.a. n.a. n.a. Retail Excluding auto dealers 6.6 14.0 25.8 12.5 5.9 3.4 1.2 1.2 1.9 3.0 n.a. n.a. 16.4 23.5 3.1 8.5 1.5 7.0 4.8 11.8 5.4 3.0 -5.3 -.4 1.3 -1.7 11.1 8.6 11.7 2.9 5.9 -1.9 -4.9 3.0 7.7 -1.2 -11.3 -26.2 -6.9 -17.5 -9.2 -8.3 13.1 -1.7 12.3 15.4 5.1 8.3 4.8 3.5 -1.0 2.1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Constant-dollar basis Total Excluding auto dealers Manufacturing Wholesale Motor vehicles Excluding motor vehicles Retail Excluding auto dealers INVENTORIES RELATIVE TO SALES 1 (Months' supply; based on seasonally adjusted data) 1993 Q3 1994 Q4 Q1 1994 Mar. Apr. May Current-cost basis Total Excluding auto dealers Manufacturing Total machinery Fabricated metal Wholesale Motor vehicles Excluding motor vehicles Retail Excluding auto dealers 1.46 1.44 1.49 1.81 1.65 1.34 1.63 1.31 1.52 1.48 1.43 1.41 1.42 1.74 1.58 1.34 1.68 1.30 1.51 1.47 1.41 1.39 1.40 1.75 1.53 1.31 1.47 1.29 1.50 1.47 1.39 1.37 1.38 1.72 1.52 1.29 1.45 1.28 1.47 1.45 1.40 1.38 1.39 1.72 1.53 1.31 1.46 1.30 1.49 1.46 n.a. n.a. 1.39 1.71 1.53 n.a. n.a. n.a. n.a. n.a. 1.55 1.54 1.60 1.421.60 1.40 1.60 1.55- 1.52 1.50 1.53 1.42 1.65 1.40 1.57 1.54 1.49 1.48 1.51 1.39 1.46 1.38 1.56 1.53 1.47 1.46 1.49 1.37 1.43 1.36 1.54 1.51 r.49 1.48 1.50 1.39 1.45 1.39 1.56 1.52 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Constant-dollar basis Total Excluding auto dealers Manufacturing Wholesale Motor vehicles Excluding motor vehicles Retail Excluding auto dealers 1. Ratio of end-of-period inventories to average monthly sales for the period. -7- RATIO OF INVENTORIES TO SALES (Current-cost data) Ratio:) 2.2 MANUFACTURING E a- 1.95 1.7 ErTotal Excluding aircraft * 1.45 " '-s "'I.'- I I I I _ 1 I I ________~_ I I I 1987 I I I I I 1.2 1993 1989 Ratio 1.5 1.4 1.3 1.2 1.1 1993 1991 1989 1987 1985 1983 1981 1979 Ratio Ratio m1 2.7 - RETAIL GAF group r. I i 2.5 1 D In I - l, , n' ,, 2.3 2.3 Total excluding auto . I 1979 .. I I 1981 i I I 1 -1I 1985 i I * 1987 I I 1989 I 1991 I I 1993 I NEW CONSTRUCTION PUT IN PLACE Billions of dollars, seasonally 1923 04r -adiusted annual rate 1994 1994 01r Mar. r Apr. Appr. Percent change from prior month2 1994 MavP Apr. May Current dollars Total Private Residential Single family Multifamily Nonresidential Industrial Office Commercial 489.3 359.3 222.5 143.3 11.1 136.8 19.6 15.7 30.1 490.1 365.8 233.3 152.6 11.4 132.5 19.9 15.7 28.3 496.0 371.7 236.8 155.0 12.0 134.9 19.9 17.0 29.6 508.5 382.7 241.2 157.1 12.7 141.5 22.0 15.8 30.6 499.5 377.1 238.8 156.3 12.6 138.3 21,3 16.5 30.6 504.2 379.6 240.6 156.9 13.2 139.0 21.6 16.4 30.6 0.7 1.5 0.8 0.9 4.7 2.5 7.1 .2.7 3.1 0.9 0.7 0.8 0.3 5.0 0.5 1.4 -0.7 0.1 Public State & local Federal 130.0 115.9 14.2 124.3 109.6 14.8 124.4 110.8 13.5 125.9 113.1 12.7 122.4 109.1 13,3 124.6 110.8 13.7 "1.6 .1.6 1.4 1.8 1.6 3.1 '412.2 299.3 112.9 409.1 302.2 106.9 413.1 306.3 106.7 422.4 314.9 107.5 416.3 311.2 105.1 419.1 312.2 106.9 0.8 1.6 15 1987 dollars Total Private Public 1 Contains components not shown separately. 2. Percent changes calculated from more digits than shown in table. r -revised, I -preliminary July i 1994 Mortgage and Consumer Finance -9COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage change at annual rate, based on seasonally adjusted data) Dec. Type of credit Level, 1992 1994 1994 to Dec. 1993 Ql Q2 p 1994 Apr. 1994 May 1994 Jun. p May 1994 ($billions) Commercial bank credit 1. Total loans and securities 5 10.1 2.0 2 3,197.9 2. Securities 8.5 17.2 7 21.2 -1.9 1 965.4 3. U.S. 9.6 11.5 2 18.0 -10.6 -0 752.1 4. Other 4.4 39.5 23 33.8 29.4 5 213.2 2 2,232.6 government 5. Loans 4.0 8 6. Business 7. Real estate 4.5 .1 4 8. Consumer 9.0 10.6 12 9. Security 35.1 -18.3 -. 6 6.5 10. -1.8 Other -36 13.7 4 606.4 2.8 6 944.6 18.2 7 410.7 -92.2 -9 8.0 9.4 -26 77.5 -13.5 -22 193.3 Short- and intermediate-term business credit 11. Business loans net of bankers acceptances 12. Loans at foreign branches 2 13. Sum of lines 11 and 12 14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 and 14 16. Bankers acceptances, U.S. trade-related3 ,4 17. Loans at finance companies4 18. Total (sum of lines 15, 16, and 17) -2.1 8 11.4 19 45.1 -12.1 -7.4 -2.5 7.8 B -12.2 -7 4.4 16.3 12.6 -11.0 -14.3 -1.1 -12.2 -.5 -1.2 4 596.9 -5 22.4 3 619.3 6 149.7 4 769.1 n.a. 11.4 n.a. n.a. 9.4 n.a. 15.3 n.a. n.a. 317.0 5.6 n.a. 10.0 n.a. n.a. 1,104.4 17.9 21.2 1. Except as noted, levels are averages of Wednesday data and percentage changes are based on averages of Wednesday data; data are adjusted for breaks caused by reclassification; changes are measured from preceding period to period indicated. 2. Loans to U.S. firms made by foreign branches of domestically chartered banks. 3. Acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 4. Changes are based on averages of month-end data. 5. April 1994. p Preliminary. n.a. Not available. 5 -10III-T-1 SELECTED FINANCIAL MARKET QUOTATIONS (Percent except as noted) Instrument FOMC.* 3 May 17 Jun 30 Mid-Oct lows I Feb - J- Change to Jun 30, 1994; 1994 I 1993 ---- ---- ! i --- From Mid-Oct lows From Feb 3 From FOMC., May 17 -------- [ ;---------- SHORT-TERM RATES Federal funds 3 07 3.07 3.73 4.41 .34 .. 34 0.68 Treasury bills 3-month 6-month I-year 3.01 3.09 3.23 3.13 4.15 4.15 3.27 3.52 4.65 5.11 4.65 5.22 1.14 S.56 1 .99 1.02 2.38 1.70 0.00 0.00 0.11 Commercial paper 1-month 3-month 3.13 3 .23 3.16 3.25 4.37 4.70 4.50 4.74 .. 37 1.51 1.34 1.49 0.13 0.04 3.08 3.22 3.23 3.11 3.25 4.28 4.61 4.44 4.73 1 .36 1.51 3.41 5.05 5.11 1.88 1.33 1.48 1.70 0.16 0.12 0.06 3.06 3 .25 3.06 4.25 4.44 4-63 4.75 1.38 1.50 . 38 3.25 1.50 0.19 0.12 6.00 6.00 6.75 .25 L.25 1.25 0.50 4.06 4.60 6.40 6.52 5.19 5.81 7.24 7.34 5.78 6.31 7.46 7.63 2.46 2.15 1 .85 1.92 1 53 .32 0.12 0.10 0.17 Municipal revenue (Bond Buyer; 5.41 5.49 6.60 6.56 1.15 1.07 -0.04 Corporate--A utility. recently offered 6.79 7.35 8.20 8.41 1.62 1 .06 0.21 Home mortgages 6, FHLMC 30-yr fixed rate -yr adjustable rate FHLMC 6.74 4.14 6.97 4.12 8.77 5.54 8.46 5.41 1.72 1.27 1.49 1.29 -0.31 0. 13 Large negotiable CDs 1-month 3-month 6-month Eurodollar deposits -month - month Bank prime rate INTERMEDIATE AND LONG-TERM RATES U.S Treasury 3-year 'constant maturity) 10-year 30-year 5 I 1989 1 Percentage change to Jun 30: 1994 Record high Stock exchange index SLevel Dow-Jones Industrial NYSE Composite NASDAQ (OTC) Wilshire 3978.36 267.71 803.93 4804.31 Date Low. Jan. 3 1/31/94 2144.64 2/2/94 154.00 3/18/94 378.56 2/2/94 2718.59 ,. One-day quotes except as noted. 2. Average for two-week reserve maintenance period closest to date shown. Last observation is average to date for maintenance period ending Jul 6. 1994. 3 Secondary market Rates are as of the close on May 16. 1994. FOMC' May 17 Jun 30 3671.50 245.78 711.91 4404.46 3624,96 245.16 705.96 4395.22 From From record high 1989 low -8.88 -8.42 -12.19 -8.52 69.02 59.19 86.49 61.67 4. Bid rates for Eurodollar deposits at 11 a.m. London time. 5. Most recent observation based on one-day Thursday quote and futures market index changes. 6. Quotes for week ending Friday previous to date shown. From FOMC,. May 17 -1.27 -0.25 -0.84 -0.21 

Federal Reserve (1994, July 5). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19940706_part2

@misc{wtfs_greenbook_19940706_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1994},
  month = {Jul},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19940706_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}