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 22, 2001 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 The International Economy .................................. 1 U.S. International Transactions ................................. 1 Trade in Goods and Services ................................... 1 U.S. Current Account through 2001:Q1 .......................... 1 U.S. International Financial Transactions ................... ...... 5 Tables Net Trade in Goods and Services .......................... 1 U.S. Exports and Imports of Goods and Services ............. 3 U.S. Current Account ............... 4 ................... Summary of U.S. International Transactions ................. 6 Chart U.S. International Trade in Goods and Services .............. 2 The Financial Economy Table Selected Financial Market Quotations ................... ... 7 Supplemental Notes The International Economy U.S. International Transactions Trade in Goods and Services The U.S. trade deficit in goods and services was $32.2 billion in April, compared with a deficit of $33.1 billion in March (revised). The value of exports declined 2 percent, with most of the decrease in capital goods, especially computers and semiconductors. The value of imports dropped 2-1/4 percent. Large declines in imported capital goods and consumer goods were partly offset by increases in oil (higher quantity) and automotive products. Net Trade in Goods and Services (Billions of dollars, seasonally adjusted) 2000 Real NIPA1 Net exports of G&S -412.4 Annual rate 2000 2001 Q3 Q4 Q1 -427.7 -441.7 Monthly rate 2001 Feb. I Mar. I Apr. -411.9 Nominal BOP Net exports of G&S -375.7 -389.4 -401.2 -380.1 -28.6 -33.1 Goods, net -452.2 -458.4 -474.1 -450.1 -34.6 -38.8 Services, net 76.5 69.1 72.9 70.0 6.0 5.7 1. Billions of chained (1996) dollars. Source: U.S. Department of Commerce, Bureaus of Economic Analysis and Census. n.a. Not available. ... Not applicable. -32.2 -37.8 5.7 As part of the annual revisions of the U.S. international transactions accounts, data for trade in the first quarter of 2001 were revised significantly. The value of imports was raised $14 billion and the value of exports was lowered $1 billion, both at a seasonally adjusted annual rate. Thus, the trade deficit for the first quarter was $15 billion (s.a.a.r.) larger than previously published. Data were revised back to 1989. Based on this week's revised trade figures, NIPA real net exports of goods and services in the first quarter of 2001 could be weakened $11 to $12 billion (s.a.a.r.) from what was published previously by BEA, with the growth of real exports raised about $5 billion and the growth of real imports raised about $16 billion. Revised NIPA data for the first quarter will be released on June 29. U.S. Current Account through 2001:Q1 The U.S. current account deficit fell to $438 billion at a seasonally adjusted annual rate in the first quarter of 2001, a decrease of $27 billion from the fourth U.S. International Trade in Goods and Services Contribution of Net Exports to Real GDP Growth Percentage points, s.a.a.r. K LI 1993 1995 1997 i 1999 2001 Bil$, s.a.a.r. Net trade in computers and semiconductors ------------------------ 20 0 / -20 _ Net automotive trade with Canada and Mexico I 1993 I I 1995 I I 1997 -40 I I. 1999 Selected Imports Bil$, s.a.a.r. Machinery 2/ Consumer goods Aircraft 1993 1995 1997 1999 1. Excludes agriculture and gold. 2. Excludes computers and semiconductors. 2 1. Excludes oil and gold. 2. Excludes computers and semiconductors. 3. Excludes Canada and Mexico. ...I -60 2001 U.S. Exports and Imports of Goods and Services (Billions of dollars, s.a.a.r., BOP basis) Exports of G&S Goods exports Gold Other goods Levels 2001 2000 2001 Apr. Mar. Q1 Q4 1080.5 1077.2 1064.6 1043.0 2000 Q4 -9.5 Amount Change1 2001 2001 Apr. Mar. Q1 -3.3 -21.1 -21.6 784.9 6.5 778.4 779.8 6.7 773.1 766.6 7.6 759.1 745.5 7.8 737.7 -12.1 2.3 -14.4 -5.2 0.2 -5.4 -22.4 0.8 -23.2 -21.1 0.3 -21.4 47.4 57.2 62.2 199.0 56.1 56.0 58.0 197.3 58.0 54.2 53.0 187.1 52.8 50.0 48.6 183.3 -1.7 -1.4 -2.6 -3.0 8.6 -1.2 -4.2 -1.7 -4.0 -1.7 -4.8 -12.3 -5.2 -4.2 -4.4 -3.8 77.2 42.1 17.2 18.0 71.8 37.5 16.2 18.0 73.1 39.5 17.6 16.1 73.5 41.3 14.9 17.3 -3.4 -3.0 1.4 -1.7 -5.5 -4.5 -1.0 0.0 2.6 2.6 1.2 -1.2 0.4 1.8 -2.8 1.3 52.7 161.2 90.7 30.7 54.4 156.7 94.0 28.9 55.4 156.2 94.3 27.8 55.0 149.6 95.0 29.9 -2.6 -0.6 -1.7 2.6 1.7 -4.6 3.3 -1.8 -0.1 -0.8 -0.0 -3.5 -0.3 -6.5 0.7 2.0 295.6 297.4 298.0 297.5 2.7 1.8 1.3 -0.5 Imports of G&S 1481.7 1457.3 1461.5 1429.1 2.4 -24.4 32.5 -32.4 Goods imports Petroleum Gold Other goods 1259.0 1229.9 1232.0 1199.5 127.5 117.2 110.1 116.0 6.7 6.1 6.2 5.6 1124.8 1106.5 1115.7 1077.9 3.5 0.3 2.5 0.7 -29.2 -10.3 -0.6 -18.3 27.6 -4.6 0.2 32.0 -32.5 5.9 -0.5 -37.8 Aircraft & parts Computers Semiconductors Other capital gds Automotive to Canada to Mexico to ROW Agricultural Ind supplies (ex. ag) Consumer goods All other goods Services exports Aircraft & parts Computers Semiconductors Other capital gds 30.6 89.6 49.0 188.1 31.0 85.7 44.3 184.6 36.9 86.5 40.1 181.5 31.2 79.6 33.3 167.8 3.9 -4.0 -3.7 2.4 0.4 -3.9 -4.7 -3.5 8.5 1.9 -5.5 -1.7 -5.7 -7.0 -6.8 -13.7 Automotive from Canada from Mexico from ROW 193.0 60.4 40.3 92.3 186.9 56.1 38.7 92.2 185.5 56.0 43.9 85.6 193.2 60.8 38.7 93.7 -5.4 -3.2 -0.6 -1.5 -6.1 -4.3 -1.7 -0.1 -1.2 0.6 8.1 -9.9 7.7 4.7 -5.2 8.1 Ind supplies Consumer goods Foods, feeds, bev. All other goods 183.2 292.6 46.3 52.3 185.4 291.7 45.9 50.9 186.2 305.3 44.7 49.1 182.6 291.0 45.0 54.3 2.6 6.4 -0.5 -1.1 2.2 -0.9 -0.5 -1.4 5.6 27.6 -1.1 -2.0 -3.6 -14.3 0.3 5.2 222.7 227.4 229.5 229.6 -1.1 4.7 4.8 0.1 12.00 29.13 12.80 25.08 12.48 24.15 13.43 23.64 -0.13 0.38 0.80 -4.05 0.22 -1.45 0.95 -0.51 Services imports Memo: Oil quantity (mb/d) Oil import price ($/bbl) 1. Change from previous quarter or month. Source: U.S. Department of Commerce, Bureaus of Economic Analysis and Census. quarter of 2000 (revised). The decrease in the current account deficit was more than accounted for by large decreases in the deficits on goods and services trade and on unilateral transfers. The trade deficit declined as the U.S. economic slowdown reduced imports more than the foreign economic slowdown reduced exports. Unilateral transfers had been elevated in 2000:Q4 by the annual grant to Israel. Partially offsetting these decreases was a significant increase in the deficit on investment income. For portfolio investment income, payments declined $14 billion (at an annual rate) while receipts declined $19 billion, as falling dividends and interest rates reduced the returns on financial assets. For direct investment income, payments increased $5 billion in a partial rebound from their depressed fourth-quarter levels. Direct investment receipts decreased $5 billion, as profits at foreign affiliates of U.S. manufacturing and petroleum companies fell back from their unusually strong fourth-quarter levels. Historical current account data were revised back to 1989. By far the biggest changes were to 1999 and 2000. The current account deficit for 1999 was revised down $7 billion to $324 billion. This revision was more than accounted for by upward revisions to direct and portfolio investment receipts of $5 billion each. The current account deficit for 2000 was revised up $9 billion to $445 billion, primarily due to higher portfolio investment payments. U.S. Current Account (Billions of dollars, seasonally adjusted annual rate) Goods and Investment Other Current Period services, income, income and account net net transfers, net balance Annual -324.4 -8.5 -54.0 -261.8 1999 2000 -375.7 -9.6 -59.3 -444.7 Quarterly 2000-Q2 Q3 Q4 2001-Q1 Change Q2-Q1 Q3-Q2 Q4-Q3 -363.1 -389.4 -401.2 -380.1 -14.4 -14.5 7.9 -6.9 -55.0 -57.4 -72.0 -51.3 -432.5 -461.2 -465.3 -438.2 -13.8 3.2 -2.2 -12.9 -26.2 -0.1 -2.3 -28.7 -11.8 22.4 -14.6 -4.1 Q1-Q4 21.1 -14.8 20.7 27.0 Source: U.S. Department of Commerce, Bureau of Economic Analysis. U.S. International Financial Transactions In addition to several quarterly and annual revisions addressed below, the June 21 release of balance of payments capital flows included preliminary data for direct investment inflows and outflows in 2001:Q1 (lines 6 and 7 of the revised Summary of International Transactions table). At almost $42 billion, foreign direct investment in the United States (line 7) was close to the staffs forecast; this figure is considerably lower than those for recent quarters, but is consistent with the low foreign takeover activity in the first quarter. The flow of U.S. direct investment abroad in the first quarter (line 6) was quite comparable to recent quarterly flows. In the release, BEA made several adjustments to official and private portfolio flows to account for misleading or incomplete coverage in the TIC system. The most prominent adjustment was the removal of a distortion arising from China's decision to shift some of its securities from European to U.S. custodians. In the attached table, we now report foreign official inflows of $4.7 billion in the first quarter (line 1), compared with the almost $20 billion reported in the table included in the Greenbook Part II. The smaller figure more accurately reflects the flows that occurred in the quarter. Offsetting adjustments were made to private foreign purchases of Treasuries (line 4a) and bank custody liabilities (included in line 3). In addition, BEA has begun to include adjustments to foreign acquisitions of U.S. equity (line 4d) to reflect the stock that is swapped when U.S. firms take over foreign firms. These adjustments raised foreign acquisition of U.S. equity by $14 billion in 1999 and $20 billion in 2000. A similar adjustment for U.S. acquisition of foreign stock acquired through swaps (line 5c) has been included in the accounts for some time. BEA also changed its methodology for estimating some banking flows, which resulted in significantly smaller reported outflows in 2000 (line 9). These smaller banking outflows, together with the newly included stock swaps, raised recorded net financial inflows in 2000 and reduced the statistical discrepancy for the year from $36 billion to near zero (last line). Summary of U.S. International Transactions (Billions of dollars, not seasonally adjusted except as noted) 55.0 393 Q2 9.4 2000 2000 Q3 12.2 46.4 39.6 7.4 12.5 -3.3 4.5 -2.0 -9.8 49.7 12.3 6.0 -4.2 -.8 -5.5 -3.3 -6.0 2.0 -5.3 10.7 16.6 1.2 .3 3.4 13.3 .6 -3.1 .8 9.2 -1.6 2.9 -0.2 -3.6 8.6 -.3 2.0 -.3 -1.4 .2 -.1 .0 321.7 404.0 147.0 102.2 118.5 75.9 ... -12.4 -1.7 44.5 -27.0 10.5 -101.6 -99.6 34.4 333.2 434.1 74.3 116.3 115.8 149.3 50.2 33.1 -19.9 71.9 158.8 122.4 -52.3 111.9 180.4 194.0 -20.4 19.0 41.6 34.1 -12.4 28.6 45.7 54.4 -10.3 38.3 49.1 38.8 0.1 38.7 68.8 41.7 -2.3 18.3 26.3 8.0 -5.7 9.8 21.9 7.1 -112.9 -97.2 -32.0 -20.8 -15.5 -23.4 -16.0 -2.1 -5.7 15.6 -122.9 -3.9 -9.3 -84.0 10.8 5.2 -48.0 -9.0 -4.1 -7.7 3.8 5.4 -24.7 -.8 -20.0 -2.6 -1.5 -14.5 -.0 5.2 -7.3 -.0 -155.4 301.0 22.4 -152.4 287.7 1.1 -33.3 90.4 1.0 -41.6 76.0 .8 -39.1 84.7 6.2 -33.0 41.6 2.3 -40.0 -47.4 9.2 4.4 -41.7 40.6 -324.4 -3.5 -444.7 .7 -108.1 .2 -115.3 .2 -116.3 .2 -109.6 .2 ... -48.8 .7 -48.5 .7 2.4 28.8 ... 1999 Official financial flows 1. Change in foreign official assets in the U.S. (increase, +) a. G-10 countries b. OPEC countries c. All other countries 2. Change in U.S. official reserve assets (decrease, +) Private financial flows Banks 3. Change in net foreign positions of banking offices in the U.S.' Securities 2 4. Foreign net purchases of U.S. securities (+) a. Treasury securities b. Agency bonds c. Corporate and municipal bonds d. Corporate stocks 3 5. U.S. net acquisitions (-) of foreign securities a. Bonds b. Stock purchases c. Stock swaps 3 Other flows (quarterly data, s.a.) 6. U.S. direct investment (-) abroad 7. Foreign direct investment in U.S. 8. Foreign holdings of U.S. currency 9. Other (inflow, + )4 U.S. current account balance (s.a.) Capital account balance (s.a.)5 Statistical discrepancy (s.a.) 2000 2001 Q4 -4.7 Q1 4.7 Mar. 0.8 Apr. -9.8 NOTE. The sum of official and private financial flows, the current account balance, the capital account balance, and the statistical discrepancy is zero. Details may not sum to totals because of rounding. 1. Changes in dollar-denominated positions of all depository institutions and bank holding companies plus certain transactions between broker-dealers and unaffiliated foreigners (particularly borrowing and lending under repurchase agreements). Includes changes in custody liabilities other than U.S. Treasury bills. 2. Includes commissions on securities transactions and excludes adjustments BEA makes to account for incomplete coverage, therefore does not match exactly the data on U.S. intemational transactions published by the Department of Commerce. 3. Includes (4d) or represents (5c) stocks acquired through mergers. 4. Transactions by nonbanking concerns and other banking and official transactions not shown elsewhere plus amounts resulting from adjustments made by the Department of Commerce and revisions in lines I through 5 since publication of the quarterly data in the Survey of Current Business. 5. Consists of transactions in nonproduced nonfinancial assets and capital transfers. n.a. Not available. ... Not applicable. III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2000 Change to June 21 from selected dates (percentage points) 2001 Instrument 2000 2001 2001 June 26 Mar. 19 May 14 June 26 Mar. 19 May 14 June 21 Short-term FOMC intended federal funds rate 6.50 5.50 4.50 4.00 Treasury bills 1 3-month 6-month 1-year 5.66 5.94 5.82 4.42 4.25 4.07 3.63 3.64 3.62 3.43 3.37 3.27 Commercial paper 1-month 3-month 6.56 6.56 4.85 4.71 4.02 3.94 3.71 3.63 Large negotiable CDs 1 1-month 3-month 6-month 6.64 6.73 6.89 4.93 4.79 4.64 4.10 4.05 4.06 3.74 3.63 3.63 -2.90 -3.10 -3.26 -1.19 -1.16 -1.01 Eurodollar deposits 2 1-month 3-month 6.63 6.69 4.90 4.79 4.06 4.06 3.71 3.65 -2.92 -3.04 -1.19 -1.14 Bank prime rate 9.50 8.50 7.50 7.00 Intermediate- and long-term U.S. Treasury (constant maturity) 2-year 10-year 30-year 6.50 6.11 5.99 4.32 4.82 5.30 4.29 5.46 5.85 3.99 5.22 5.64 U.S. Treasury 10-year indexed note 4.08 3.29 3.23 3.26 -.82 -.03 .03 Municipal revenue (Bond Buyer) 3 5.99 5.40 5.56 5.52 -.47 .12 -.04 7.38 7.15 8.49 11.97 5.76 5.67 7.31 12.03 6.24 6.14 7.43 12.03 6.02 5.95 7.12 13.11 8.14 7.22 6.96 6.32 7.10 5.90 7.14 5.82 .18 -.50 .04 -.08 Private instruments 10-year swap 10-year FNMA Merrill Lynch BBB 4 High yield Home mortgages (FHLMC survey rate) 5 30-year fixed 1-year adjustable Change to June 21 from selected dates (percent) Stock exchange index Dow-Jones Industrial S&P 500 Composite Nasdaq (OTC) Russell 2000 Wilshire 5000 1. 2. 3. 4. 5. 11,723 1,527 5,049 606 14,752 1-14-00 3-24-00 3-10-00 3-9-00 3-24-00 9,959 1,171 1,951 451 10,754 10,877 1,249 2,082 487 11,506 10,715 1,237 2,059 498 11,424 -8.59 -19.01 -59.22 -17.87 -22.56 7.59 5.66 5.51 10.32 6.22 -1.49 -.95 -1.11 2.30 -.71 Secondary market. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. Most recent Thursday quote. Merrill Lynch 175 high-yield bond index composite. For week ending Friday previous to date shown. NOTES: June 26, 2000, is the day before the FOMC meeting that ended the most recent period of policy tightening. March 19, 2001, is the day before the March FOMC meeting. May 14, 2001 is the day before the most recent FOMC meeting. D A -A A 

Federal Reserve (2001, June 26). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20010627_part2

@misc{wtfs_greenbook_20010627_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2001},
  month = {Jun},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20010627_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}