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 September 28, 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 Domestic Nonfinancial Economy .............................. Consumer Sentiment ................................... 1 1 Gross Domestic Product: Q2 Final ...................... .1 Business Inventories ................................. .2 Tables University of Michigan Survey Research Center: Survey of Consumer Attitudes ................................ Real Gross Domestic Product and Related Items ... ... ..... Price Indexes for Gross Domestic Product .................. Change in Inventories at Durable Goods Manufactures ........ 3 4 5 6 The Financial Economy Table Selected Financial Market Quotations ............... M onetary Aggregates ...................... ...... ............ 7 8 Supplemental Notes The Domestic Nonfinancial Economy Consumer Sentiment According to the final report, the Michigan Survey Research Center (SRC) index of consumer sentiment fell almost 10 points in September. After having dropped considerably late in 2000, on balance, the SRC index had moved little through mid-August of this year. However, according to the bi-monthly reports, the SRC composite index tumbled in the second half of August before sliding further in both the first and second halves of this month.1 Since midAugust, respondents have reported less favorable assessments of current conditions and much less optimism about business conditions expected in the next twelve months and the next five years. Among those items not included in the overall index, expectations about the change in unemployment over the next twelve months deteriorated noticeably in September, and the diffusion index rose to its highest level since January 1991. 2 Appraisals of current home-buying conditions were also less favorable this month, but this diffusion index remained in the elevated range registered so far this year. Meanwhile, appraisals of buying conditions for autos were little changed in September. The mean and median of expected inflation over the next twelve months inched up 0.1 percentage point in September, to 3.2 percent and 2.8 percent, respectively. The mean of expected inflation over the next five to ten years decreased 0.2 percentage point to 3.4 percent, and the median inched down 0.1 percentage point to 2.9 percent. Gross Domestic Product: 2001:Q2 Final According to the BEA's final estimate, real GDP increased at an annual rate of 0.3 percent in the second quarter. Private businesses liquidated inventories at an annual rate of $38.3 billion last quarter, following a runoff of $27.1 billion in the first quarter, and this swing in private inventory investment subtracted 0.4 percentage point from the change in second-quarter real GDP. Final sales rose at an annual rate of 0.7 percent in the second quarter, off sharply from the 4.0 percent increase in the previous quarter. Within final sales, personal 1 Looking even more closely at the weekly survey responses, the SRC reported that the overall sentiment index bounced up in the week immediately following September 11, then plunged toward the end of the month. That said, the weekly SRC data must be interpreted cautiously because they rely on small and possibly unbalanced (with respect to income, for example) samples. 2. As with the SRC composite index, the bi-monthly reports indicate a rather steady deterioration in unemployment expectations since the second half of August. consumption expenditures and government spending posted weaker increases than in the first quarter, while investment in residential structures, nonresidential structures, and equipment and software spending fell sharply. In addition, net exports arithmetically held down the second-quarter change in real GDP by about 0.1 percentage point. Today's estimate of the rise in real GDP was 0.1 percentage point above the preliminary estimate and close to the staff estimate in the September Greenbook. The release included no large revisions or substantial discrepancies in any of the major categories. The GDP price index is now estimated to have increased at an annual rate of 2.1 percent in the second quarter, down 0.1 percentage point from the preliminary release, and well below the 3.3 percent rate of increase in the first quarter. The increase in core PCE prices was revised down to 0.7 percent. The BEA now reports that current-dollar corporate profits declined $30 billion in the second quarter, little changed from the estimate reported in the preliminary release; in the first quarter, profits fell $57.8 billion. Profits of financial corporations were revised down $14.9 billion, while nonfinancial corporate profits were revised up $6.7 billion; in addition, the BEA raised its estimate of profits from the rest of the world by $6.8 billion. Altogether, profits (excluding those earned by Federal Reserve Banks) were 7.2 percent of GNP in the second quarter, down from 7.5 percent in the first quarter. Business Inventories Attached is a table containing updated data on manufacturing inventories at producers of durable goods. September 28, 2001 UNIVERSITY OF MICHIGAN SURVEY RESEARCH CENTER: SURVEY OF CONSUMER ATTITUDES (Not seasonally adjusted) 2001 Jan. 2001 Feb. 2001 Mar. 2001 Apr. 2001 May 2001 June 2001 July 2001 Aug. 2001 Sept. (f) 94.7 107.7 86.4 90.6 105.8 80.8 91.5 103.4 83.9 88.4 98.0 82.2 92.0 102.2 85.4 92.6 101.6 86.9 92.4 98.6 88.4 91.5 101.2 85.2 81.8 94.6 73.5 Personal financial situation Now compared with 12 months ago* Expected in 12 months* 123 126 122 129 119 131 110 134 112 129 117 126 114 133 118 127 108 128 Expected business conditions Next 12 months* Next 5 years* 106 115 93 102 97 109 92 104 99 115 114 109 115 107 102 113 71 95 Expected inflation - next 12 months Mean Median 3.8 3.0 3.2 2.8 3.3 2.8 3.7 3.1 3.9 3.2 4.0 3.0 3.0 2.6 3.1 2.7 3.2 2.8 Expected inflation - next 5 to 10 years Mean Median 3.5 2.9 3.6 3.0 3.6 3.0 3.6 3.1 3.6 3.0 3.6 3.0 3.4 2.9 3.6 3.0 3.4 2.9 Indexes of consumer sentiment (Feb. 1966=100) Composite of current and expected conditions Current conditions Expected conditions Appraisal of buying conditions Cars Large household appliances* Houses Willingness to use credit Willingness to use savings Expected unemployment change - next 12 months Prob. household will lose a job - next 5 years * -- Indicates the question is one of the five equally-weighted components of the (p) (f) --- index of sentiment. Preliminary Final Note: Figures on financial, business, and buying conditions are the percent reporting 'good times' '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, plus 100. (or 9-28-01 Real Gross Domestic Product and Related Items (Percent change from previous period at compound annual rate; based on seasonally adjusted data, chain-type indexes) 2001 :Q1 2001 :Q2 2001 :Q2 2001:Q1 Final 2001:Q2 Preliminary 2001:Q2 Final 1. Gross Domestic Product 1.3 .2 .3 2. 4.0 .6 7 3.0 2.5 2.5 10.6 7.1 7.0 .4 .3 3. Final sales Consumer spending 4. Durables 5. Nondurables 2.4 6. Services 1.8 2.6 2.8 -.2 -14.6 -14.6 7. Business fixed investment 8. Nonresidential structures 12.3 -13.4 -12.2 9. Equipment and software -4.1 -15.1 -15.4 10. Residential investment 8.5 5.8 5.9 11. Federal government consumption expenditures and investment 3.2 1.5 1.8 12. State and local government consumption expenditures and investment 6.4 7.4 6.6 13. Exports of goods and services -1.2 -12.2 14. Imports of goods and services -5.0 -7.7 -8.4 -27.1 -38.4 -38.3 -404.5 -410.5 -406.7 17 Nominal GDP 4.0 2.0 2.4 18. GDP price index 3.3 2.2 2.1 19. PCE price index 3.2 1.6 1.3 2.6 .9 7 2 21. Profit share, excluding FR banks 7.5 7.2 7.2 22. Real disposable personal income 2.7 2.4 2.4 23. Personal saving rate (percent) 11 11 11 -11.9 ADDENDA: 15. Inventory investment' 16. Net exports of goods and services 20. Excluding food and energy 1 Level, billions of chained (1996) dollars. 2. Economic profits as a share of GNP 1 Price Indexes for Gross Domestic Product (Percent change from previous period at compound annual rates; based on seasonally adjusted data, chain-type indexes) 1. 2. Gross domestic product Gross domestic purchases 3. Personal consumption expenditures 4. Food and Beverages 5. Energy 6. Excluding food and energy 2001:Q1 2001:Q2 2001:Q2 Final Prelim. Final 3.3 2.2 2.1 2.7 1.4 1.3 3.2 1.6 1.3 4.0 2.6 2.6 11.7 9.3 9.2 2.6 .9 .7 7. Business fixed investment -1.9 -.5 -.1 8. Equipment and Software -4.6 -1.9 -1.9 -30.9 -17.4 6.2 3.7 4.7 9. Computers and peripheral equipment 10. Nonresidential structures -17.3 11. Residential investment 4.6 1.9 2.6 12. Government consumption expenditures and investment 3.5 1.8 1.8 13. Exports of goods and services -.1 -.8 -1.0 14. Imports of goods and services -3.0 -5.9 -6.0 1.4 -5.6 -5.6 15. Nonpetroleum goods ADDENDA: 16. GDP less food and energy 2.2 1.3 1.2 17. Gross domestic purchases less food and energy 2.3 1.0 .9 CHANGE IN INVENTORIES AT DURABLE GOODS MANUFACTURERS (book value, billions of dollars at annual rate) 2000 Durable goods Lumber and wood prod. Nonmetalic mineral prod. Primary metals Fabricated metals Machinery Computer and electronic prod. Electrical equipment Transportation equipment Motor vehicles Aircraft & parts Furniture Other durables STAGE OF PROCESSING Materials and supplies Work in process Finished goods 2001 Q3 Q4 Q1 11.5 -.8 0.7 0.4 2.0 4.6 0.8 2.5 -1.3 1.1 -1.9 0.8 1.9 18.1 0.1 1.0 -.5 0.8 5.4 10.9 2.2 -2.0 -2.2 2.2 -.1 0.3 -9.6 -.6 0.1 -2.6 -.4 1.6 1.6 0.3 -9.0 -2.8 -6.6 -.7 0.1 3.2 -7.8 16.1 5.7 0.2 12.2 -4.3 -4.1 -1.2 2001 Q2 May June July Aug. -25.2 0.3 -.4 -3.8 -3.9 -3.0 -8.8 -2.4 -1.8 -.6 -1.6 -1.1 -.3 -27.8 0.8 -.8 -4.8 -3.2 -5.8 -6.2 -2.3 -4.0 -4.9 0.2 -1.2 -.3 -40.2 0.6 0.3 -4.1 -6.5 -.0 -11.9 -3.5 -14.4 -3.0 -4.3 -1.1 0.4 -34.6 -1.3 -1.1 -3.6 -3.0 -5.0 -13.2 -3.0 -2.0 -2.3 1.3 -1.8 -.6 -24.6 -.4 -1.5 -3.3 -.3 -3.6 -8.9 0.0 -3.5 -3.8 1.3 -2.2 -.9 -14.4 -8.4 -2.5 -7.0 -14.7 -6.2 -23.6 -14.1 -2.5 -17.0 -6.3 -11.3 -10.2 -7.8 -6.6 INVENTORY-SHIPMENTS RATIOS AT DURABLE GOODS MANUFACTURERS 2000 Durable goods Lumber and wood prod. Nonmetalic mineral prod. Primary metals Fabricated metals Machinery Computer and electronic prod. Electronic equipment Transportation equipment Motor vehicles Aircraft & parts Furniture Other durables 2001 2001 Q3 Q4 Q1 Q2 1.50 1.41 1.24 1.68 1.63 1.97 1.23 1.38 1.42 0.58 4.20 1.37 1.90 1.55 1.45 1.32 1.77 1.67 2.05 1.27 1.39 1.48 0.61 4.35 1.39 1.89 1.59 1.51 1.36 1.80 1.71 2.01 1.38 1.41 1.49 0.62 4.02 1.42 1.89 1.59 1.41 1.32 1.76 1.69 2.06 1.52 1.39 1.42 0.59 3.84 1.42 1.89 May June July Aug. 1.58 1.37 1.30 1.74 1.68 2.02 1.55 1.40 1.39 0.57 3.79 1.42 1.87 1.60 1.38 1.33 1.78 1.71 2.11 1.56 1.41 1.39 0.59 3.49 1.47 1.90 1.59 1.39 1.31 1.72 1.68 2.06 1.60 1.45 1.37 0.56 3.77 1.40 1.88 1.60 1.39 1.29 1.71 1.67 2.04 1.67 1.43 1.38 0.56 3.82 1.36 1.85 II-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2000 Change to Sept. 27 from selected dates (percentage points) 2001 Instrument June 26 Aug. 20 Sept. 10 Sept. 27 2000 June 26 2001 Aug. 20 2001 Sept. 10 Short-term FOMC intended federal funds rate 6.50 3.50 3.50 3.00 -3.50 -.50 -.50 Treasury bills 1 3-month 6-month 5.66 5.94 3.34 3.30 3.19 3.13 2.33 2.25 -3.33 -3.69 -1.01 -1.05 -.86 -.88 Commercial paper 1-month 3-month 6.56 6.56 3.50 3.37 3.42 3.24 2.67 2.40 -3.89 -4.16 -.83 -.97 -,75 -.84 Large negotiable CDs 1 1-month 3-month 6-month 6.64 6.73 6.89 3.55 3.45 3.46 3.46 3.26 3.24 2.61 2.52 2.46 -4.03 -4.21 -4.43 -.94 -.93 -1.00 -.85 ..74 -.78 Eurodollar deposits 2 1-month 3-month 6.63 6.69 3.49 3.42 3.41 3.26 2.60 2.51 -4.03 -4.18 -.89 -.91 -.81 -.75 Bank prime rate 9.50 6.75 6.50 6.00 -3.50 -.75 -.50 6.54 6.35 6.22 3.81 5.21 5.59 3.59 5.14 5.55 2.84 4.91 5.54 -3.70 -1.44 -.68 -.97 -.30 -.05 -.75 -.23 -.01 U.S. Treasury 10-year indexed note 4.08 3.33 3.26 3.16 -.92 -.17 -.10 Municipal revenue (Bond Buyer) 4 5.99 5.31 5.25 5.41 -.58 .10 .16 Private instruments 10-year swap 10-year FNMA 10-year AA 5 10-year BBB 5 6 Highyield 7.38 7.15 7.60 8.49 11.97 5.77 5.72 6.35 7.14 12.51 5.62 5.64 6.30 7.08 12.86 5.26 5.28 6.23 7.11 14.04 -2.12 -1.87 -1.37 -1.38 2.07 -.51 -.44 -.12 -.03 1.53 -.36 -.36 -.07 .03 1.18 Home mortgages (FHLMC survey rate)7 30-year fixed 1-year adjustable 8.14 7.22 6.92 5.71 6.89 5.64 6.80 5.58 -1.34 -1.64 -.12 -.13 -.09 -.06 Intermediate- and long-term U.S. Treasury 2-year 10-year 30-year 3 Record high Change to Sept. 27 from selected dates (percent) 2001 Stock exchange index Dow-Jones Industrial S&P 500 Composite Nasdaq (OTC) Russell 2000 Wilshire 5000 Level Date Aug. 20 Sept. 10 Sept. 27 Record high 2001 Aug. 20 2001 Sept. 10 11,723 1,527 5,049 606 14,752 1-14-00 3-24-00 3-10-00 3-9-00 3-24-00 10,320 1,171 1,881 479 10,838 9,606 1,093 1.695 441 10,104 8.681 1,019 1.461 393 9,350 -25.95 -33.31 -71.07 -35.17 -36.62 -15.88 -13.04 -22.36 17.94 -13.73 -9.62 -6.77 -13.84 -10.84 -7.47 1. Secondary market. 2. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. 3. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 4. Most recent Thursday quote. 5. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. 6. Merrill Lynch 175 high-yield bond index composite. 7. 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. August 20, 2001 is the day before the most recent FOMC meeting. September 10, 2001 is the day before the terrorist attacks. BA:DAM Monetary Aggregates (Based on seasonally adjusted data) Aggregate or component Aggregate 1. M2 2 2. M3 Selected components 3. Currency 4. Liquid deposits 3 5. Small time deposits 6. Retail money market funds 7. M3 minus M2 4 8. Large time deposits, net5 9. Institution-only money market mutual funds 10. RPs 11. Eurodollars Memo 12. M1 13. Sweep-adjusted M1 6 14. Demand deposits 15. Other checkable deposits 16. Savings deposits 17. Monetary base 6.2 9.3 24.0 11.7 17.9 -1.7 1.6 -10.9 -0.8 6.7 1.4 10.4 15.0 54.9 21.0 7.7 Percent change (annual rate)1 9.7 7.4 -1.0 8.5 21.6 -9.1 2.0 8.1 -12.4 25.2 19.1 19.3 5284.9 7671.4 18.9 562.4 18.6 -10.7 2703.1 1013.0 997.6 -10.5 -19.1 2386.5 -21.5 802.1 -20.9 -12.2 -14.8 58.1 -35.0 20.5 997.6 370.3 216.5 7.9 8.8 6.5 39.7 1143.0 1577.5 314.4 257.5 2131.3 615.4 -13.4 30.2 122.5 2.3 24.5 23.9 15.2 48.2 Average monthly change (billions of dollars)7 Selected managed liabilities at commercialbanks 18. Large time deposits, gross 8.7 1.3 -3.9 -6.5 -14.8 1.6 943.2 19. Net due to related foreign institutions 1.3 -10.2 -3.9 6.4 3.1 -31.9 193.9 20. U.S. government deposits at commercial banks 3.8 2.3 44.1 -53.0 59.1 1. For the years shown, Q4 to Q4 precent change. For the quarters shown, based on quarterly averages. 2. Sum of M1, retail money market funds, saving deposits, and small time deposits. 3. Sum of demand deposits, other checkable deposits, and saving deposits. 4. Sum of large time deposits, institutional money funds, RP liabilities of depository institutions, and Eurodollars held by U.S. addressees. 5. Net of holdings of depository institutions, money market mutual funds, U.S. government and foreign banks and official institutions. 6. Sweep figures used to adjust these series are the estimated national total of transaction account balances initially swept into MMDAs owing to the introduction of new sweep programs on the basis of monthly averages of daily data 7. For the years shown, "average monthly change" is the Q4 to Q4 dollar change divided by 12. For the quarters shown, it is the quarter-to-quarter dollar change, divided by 3. p--Preliminary 

Federal Reserve (2001, October 1). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20011002_part2

@misc{wtfs_greenbook_20011002_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2001},
  month = {Oct},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20011002_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}