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 November 9, 2000 CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System Contents Domestic Nonfinancial Economy .............................. Producer Prices ....................................... 1 Tables Recent Changes in Producer Prices ....................... 2 1 3 U.S. International Transactions ............................ Prices of Internationally Traded Goods ..................... 3 Table Prices of U.S. Imports and Exports ........................ 4 The Financial Economy ..................................... 5 Erratum ................................................... 5 Table Selected Financial Market Quotations ...................... Commercial Bank Credit .............................. 6 7 Supplemental Notes The Domestic Nonfinancial Economy Producer Prices The producer price index for finished goods rose 0.4 percent in October, pushed up by sizable increases in prices of food and energy items. Excluding food and energy, core producer prices declined 0.1 percent last month, coming in a bit below our expectation. Over the past twelve months, the core PPI has increased 1.0 percent, nearly a percentage point less than its pace in the prior year. However, tobacco prices more than accounted for that deceleration; excluding tobacco, core producer prices have accelerated about 1/2 percentage point over the past year. Energy prices rose 1.4 percent in October, boosted by a further sharp increase in natural gas prices. In contrast, gasoline and heating oil prices dropped back in October following large increases in the previous month. Over the past twelve months, the PPI for energy has risen more than 19 percent, compared with an increase of about 12 percent in the year-earlier period. Wholesale food prices also jumped in October, with increases registered for many different food items; however, this index is quite volatile, and we see little signal in last month's numbers. Prices of core consumer goods were flat in October; as a small rise in the PPI for tobacco and increases in prices of a range of other items were offset by decreases in the prices for cars and light trucks. Last month prices of cars and light trucks were down 1.8 percent and 1.2 percent, respectively, following similarly sized increases in the previous month. Monthly changes in vehicle prices can be especially volatile around this time of the year, largely because October is the month in which the PPI sample switches almost entirely to new model-year vehicles. Cutting through the recent swings in prices, over the past twelve months car prices have fallen 1.1 percent, and light truck prices have moved down 0.6 percent.1 The PPI for capital goods was unchanged in October. In addition to the decline in light vehicle prices mentioned, computer prices fell 0.7 percent last month and are down 14 percent over the past year; in the previous twelve-month 1. As new vehicles are introduced into the PPI sample in October of each year, the BLS adjusts for quality change by using estimates of the dollar value of additional features included as standard equipment on the new models. (The BLS uses this information to adjust for quality in both the PPI and the CPI.) According to this year's estimates, the total dollar increase in retail prices for model-year 2001 passenger cars compared with cars from the previous model year averaged $422.51 per vehicle. Quality improvements accounted for about 50 percent of that increase. For light trucks, the total dollar increase in retail prices averaged $450.30 per vehicle, and quality improvements accounted for about two-thirds of that increase. -2- RECENT CHANGES IN PRODUCER PRICES (Percent change; based on seasonally adjusted data)1 Relative importance, Dec. 1999 2000 1998 1999 Q1 2000 Q3 Q2 ----- Annual rate-----Finished goods Consumer foods Consumer energy Other finished goods Consumer goods Capital equipment Sept. Oct. -Monthly rate- 100.0 22.9 13.8 63.3 38.9 24.4 .0 .1 -11.7 2.5 4.2 .0 2.9 .8 18.1 .9 1.2 .3 7.9 3.6 51.8 .8 .8 .9 2.3 2.7 8.3 1.4 1.0 1.2 2.0 -2.3 8.6 1.9 2.1 1.7 .9 .4 3.7 .3 .4 .2 .4 .8 1.4 -.1 .0 .0 Intermediate materials2 Excluding food and energy 95.5 81.7 -3.0 -1.6 4.0 1.9 9.5 4.2 3.1 2.7 3.1 .3 .7 .0 .2 .0 Crude food materials Crude energy Other crude materials 39.0 39.0 22.0 -11.0 -23.8 -16.0 -.1 36.9 14.0 21.5 84.9 9.9 -10.4 163.6 -10.7 -14.0 11.8 -10.5 3.9 8.1 .3 3.5 4.6 -. 6 1. 2. Changes are from final month of preceding period to final month of period indicated. Excludes materials for food manufacturing and animal feeds. RECENT CHANGES IN PRODUCER PRICES -- RELATIVE CONTRIBUTION1 (Percent change; based on seasonally adjusted data) 2 Relative importance Dec. 1999 2000 1998 1999 Q1 Q2 2000 Q3 ----- Annual rate-----Finished goods Consumer foods Consumer energy Other finished goods Consumer goods Capital equipment 1. 2. 100.0 22.9 13.8 63.3 38.9 24.4 .0 .0 -1.6 1.5 1.6 .0 2.9 .2 2.2 .6 .5 .1 7.9 .8 6.2 .5 .3 .2 2.3 .6 1.2 .8 .4 .3 2.0 -. 5 1.3 1.2 .8 .4 Sept. Oct. -Monthly rate.9 .1 .6 .2 .1 .1 Data may not add due to rounding. Changes are from final month of preceding period to final month of period indicated. .4 .2 .2 -. 0 .0 .0 period these prices declined about 21 percent. Increases were posted for most other items and were particularly large for civilian aircraft and for oil and gas field machinery. Over the past year, capital goods prices have risen 0.9 percent, up about 1/2 percentage point from the pace in the previous twelve months. At earlier stages of processing, the PPI for core intermediate goods was flat in October. Although this index was up about 2 percent over the past year, twelvemonth changes in these prices have moved lower since the spring. 2 The index for core crude goods dropped 0.6 percent last month, with sizable declines posted for iron and steel scrap, aluminum scrap, and wastepaper. Over the past year, these prices have fallen about 1/2 percent, down considerably from the 6-1/2 percent increase registered in the previous twelve-month period. U.S. International Transactions Prices of Internationally Traded Goods Oil. The price of imported oil (BLS) declined 3.2 percent in October following an increase of 11 percent in September. In late September, following the Clinton administration's decision to release 30 million barrels of oil from the Strategic Petroleum Reserve, the spot price of West Texas Intermediate (WTI) fell from its post-Gulf War high of $37.20 per barrel to near $30 per barrel. During October, however, spot oil prices moved higher as the deteriorating situation in the Middle East, the terrorist attack on the USS Cole, and Iraqi threats to suspend exports raised the possibility that oil supplies from the region could be disrupted. An increase in OPEC's production targets of 500,000 b/d had little effect on oil prices because most OPEC countries appear to be producing at capacity. Spot WTI remained between $33 and $35 per barrel during the latter half of October, and is currently trading around $33 per barrel. Non-oil imports. Prices of imported non-oil goods were unchanged in October after having dipped in September. Increases in prices of imported industrial supplies (led by rising natural gas prices), semiconductors, and automotive products were offset by declines in prices of computers, consumer goods, and foods. Prices of core goods imports (which exclude oil, computers, and semiconductors) rose 0.1 percent in October, slightly less than the monthly average for the previous two quarters. In the third quarter, the price of core 2. With this release, the BLS announced that beginning in January 2001, the index for microprocessors--a component of the PPI for intermediate materials--will incorporate quality adjustments based on a hedonic estimate of the value of increases in the processing power of microprocessors. -4- Prices of U.S. Imports and Exports (Percentage change from previous period) Annual rates 2000 Q2 Q3 Q1 - ----- BLS prices 1995 weights)---------10.5 0.1 6.8 0.2 1.2 -0.5 105.1 -6.3 54.4 1.0 11.0 -3.2 1.7 1.0 0.9 0.1 -0.2 0.0 2.1 1.5 1.5 0.1 -0.2 0.1 Merchandise imports Oil Non-oil Core goods* Foods, feeds, beverages Industrial supplies ex oil Computers Semiconductors Cap. goods ex comp & semi Automotive products Consumer goods Merchandise exports Agricultural Nonagricultural Core goods* Industrial supples ex ag Computers Semiconductors Cap. goods ex comp & semi Automotive products Consumer goods Chain price index Imports of goods & services Non-oil merchandise Core goods* 0.0 11.0 -1.4 -3.9 -1.5 0.7 -0.8 -4.4 9.8 -9.1 0.0 0.3 1.4 -1.9 -4.6 8.3 -3.4 -4.7 -1.5 0.4 -0.4 0.2 0.7 -0.2 0.3 -0.1 -0.2 0.0 -0.7 -0.6 -0.4 0.0 -0.1 -0.1 -0.1 -0.1 0.8 -1.9 0.2 -0.2 0.1 -0.1 2.7 0.5 2.9 4.2 2.0 5.7 1.5 2.1 -0.3 -12.1 1.1 1.8 -0.2 -2.1 -0.1 -0.1 0.5 3.2 0.3 0.4 -0.1 0.7 -0.2 -0.2 12.2 -7.1 -5.0 0.8 0.3 0.5 5.9 -4.5 -4.1 1.3 0.8 -0.1 2.8 :-0.3 -2.2 -0.6 -5.5 -0.1 1.0 0.1 1.0 0.0 0.0 -0.1 1.1 0.0 -0.1 0.0 0.1 -0.2 -0.5 0.0 -0.6 0.0 -0.1 -0.1 ---Prices 5.6 0.9 1.5 in the NIPA accounts (1996 weights)--0.2 3.9 0.8 0.7 1.8 1.5 Exports of goods & services Nonag merchandise Core goods* 1.9 1.4 3.2 */ Excludes computers and semiconductors. n.a. Not available. Monthly rates 2000 Oct. Sept Aug. 1.9 1.3 2.4 0.9 0.9 1.3 ... Not applicable. Oil Prices Dollars per barrel - 40 Spot West Texas Intermediate - 35 S30 25 20 15 10 I I 1990 1991 I 1992 I I 1993 1994 I 1995 I 1996 1997 I ,. , 1998 I , , . i5 . , 1999 2000 goods imports rose at an annual rate of 1.5 percent. The increase was attributable to industrial supplies and, to a much lesser extent, to automotive products. The price indexes of imported machinery, consumer goods, and foods all declined in the third quarter. Exports. Prices of total goods exports resumed a recent downward trend in October following a moderate increase in September. Prices of agricultural exports rose in October (primarily increasing grain prices), but at a much slower rate than in September. The decline in prices of nonagricultural exports was attributable largely to industrial supplies as exported fuel prices-which jumped substantially in September-fell in October. Prices of exported core goods (which exclude computers, semiconductors, and agricultural products) declined slightly in October with declines or zero change recorded in all major trade categories. In the third quarter, prices of total goods exports were about unchanged. Prices of computers, semiconductors and agricultural exports declined. The price of core goods exports rose at an annual rate of 1.3 percent in the third quarter, a somewhat smaller rise than in second quarter, with increases recorded in prices of industrial supplies, machinery, and automotive products. NOTE: Prices of core goods imports and exports in October were consistent with projections for the fourth quarter presented in the November Greenbook. The Financial Economy Erratum On page -A-1 of Part 2 of the Greenbook, the first sentence of the second paragraph should read: "Over the past three months, the number of foreign and domestic banking institutions that reported tightening standards and terms on C&I loans to large and medium-sized firms--80 and 44 percent respectively-exceeded the number that tightened lending conditions following the financial crisis in the fall of 1998." Selected Financial Market Quotations (One-day quotes in percent except as noted) 1999 Change to Nov. 8 from 2000 Instrument selected dates (percentage points) FOMC* 1999 2000 FOMC* June 29 May 15 Oct. 3 1.75 .50 .00 1.29 138 .00 -.09 -.03 -.01 6.54 6.71 .00 -.07 -.01 -.06 9.00 9.50 .50 .00 5.68 5.93 6.07 6.88 6.47 6.17 5.98 5.83 5.93 U.S. Treasury 10-year indexed note 4.01 4.21 3.97 -.34 -. 10 Municipal revenue (Bond Buyer) 3 5.62 6.23 5.85 -.50 -.12 6.81 6.59 7.60 10.53 7.82 7.70 8.86 11.94 6.93 6.76 8.15 11.92 7.63 5.93 8.52 6.96 7.88 7.21 .10 1.19 -.79 .16 -.15 -.09 1-14-00 3-24-00 3-10-00 3-9-00 3-24-00 10,808 1,452 3,608 498 13,438 10,700 1,436 3,569 512 13,522 -6.96 -7.74 -35.99 -17.40 -10.84 .92 -2.97 -10.42 58 -2.12 1.93 -1.88 -9.45 -2.15 -2.73 June 29 May 15 Oct 3 Short-term FOMC intended federal funds rate 4.75 6.00 6.50 Treasury bills 1 3-month 6-month 1-year 4.70 4.92 4.89 5.94 6.24 6.05 6.03 6.01 5.75 Commercial paper 1-month 3-month 5.18 5.12 6.47 6-59 6.50 6.51 Large negotiable CDs I 1-month 3-month 6-month 5.21 5.32 5.43 6.55 6.74 6.97 6.57 6.70 6.67 Eurodollar deposits 2 1-month 3-month 5.13 5.25 6.53 6.72 Bank prime rate 7.75 Intermediate-and long-term U.S. Treasury (constant maturity) 2-year 10-year 30-year Private instruments 10-year swap 10-yearFNMA Merrill Lynch BBB 4 High yield 5 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable Nov. 8 Stock exchange index Dow-Jones Industrial S&P 500 Composite Nasdaq (OTC) Russell 2000 Wilshire 5000 11,723 1,527 5,049 606 14,752 10,907 1,409 3,232 501 13,153 1. Secondary market. 2. Bid rates for Eurodollar deposits collected around 9:30 ami. Eastern time. 3. Most recent Thursday quote. 4. Merrill Lynch 175 high-yield bond index composite. 5. For week ending Friday previous to date shown. * Data are as of the close on October 2. 2000. NOTE. June 29, 1999 is the day before the beginning of the most recent sequence of policy tightenings. NOTE. May 15, 2000 is the day before the most recent tightening. BA:DAM -7- Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Q2 2000 Q3 2000 Aug. 2000 Sept. Oct. Level, Oct. 2000 2000 2000 ($ billions) 5.5 4.1 12.7 12.5 9.7 10.0 9.5 10.4 8.2 11.7 -5.7 -6.0 5,039 5,139 8.3 3.1 2.8 3.8 10.9 10.2 .5 27.3 3.0 4.7 -1.3 14.8 -.7 3.4 -9.7 25.2 -4.6 9.7 -7.8 37.7 -19.8 -20.0 -22.3 -16.6 1,207 1,307 792 514 Loans3 Total 7. 8. Business 9. Real estate 10. Home equity 11. Other 4.5 4.9 9.4 -3.3 10.4 13.4 13.6 15.9 29.2 14.9 11.9 9.4 10.5 13.6 10.2 12.8 10.2 6.6 13.3 6.1 12.5 1.0 8.1 17.2 7.4 -1.2 -.6 -2.1 21.0 -3.8 3,832 1,081 1,625 122 1,503 12. 13. 14. -2.3 4.4 -1.8 9.4 7.9 9.5 12.9 11.5 20.1 21.0 12.7 27.9 8.4 5.2 50.4 -1.6 -4.7 .0 533 837 592 Type of credit Total 1. Adjusted 2. Reported 3. 4. 5. 6. Securities Adjusted1 Reported U.S. government Other 2 Consumer Adjusted 4 Other s 1999 Note. All data are adjusted for breaks caused by reclassifications. Monthly levels are pro rata averages of weekly (Wednesday) levels. Quarterly levels (not shown) are simple averages of monthly levels. Annual levels (not shown) are levels for the fourth quarter. Growth rates are percentage changes in consecutive levels, annualized but not compounded. These data have been benchmarked to the December 1999 Call Report, 1. Adjusted to remove effects of mark-to-market accounting rules (FIN 39 and FIN 115). 2. Includes securities of corporations, state and local governments, and foreign governments and any trading account assets that are not U.S. government securities. 3. Excludes interbank loans. 4. Includes an estimate of outstanding loans securitized by commercial banks. 5. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables. 

Federal Reserve (2000, November 14). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20001115_part1

@misc{wtfs_greenbook_20001115_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2000},
  month = {Nov},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20001115_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}