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 20, 2002 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 Domestic Nonfinancial Economy . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Housing Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Tables Private Housing Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Chart Private Housing Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The Domestic Financial Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Tables Commercial Bank Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Selected Financial Market Quotations . . . . . . . . . . . . . . . . 4 The International Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 U.S. International Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Trade in Goods and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Tables Net Trade in Goods and Services . . . . . . . . . . . . . . . . . . . . 5 U.S. Exports and Imports of Goods and Services . . . . . . . 6 Supplemental Notes The Domestic Nonfinancial Economy Housing Market Total private housing starts declined 2.2 percent in August to an annual rate of 1.61 million units. The decline was almost entirely concentrated in the Midwest, where starts dropped nearly 19 percent. Although housing starts have retreated from the elevated levels seen during the first half of this year, homes continued to be started at about the robust pace recorded in the first half of 2001. In the single-family sector, housing starts fell 4.4 percent in August to an annual rate of 1.25 million units, the slowest pace since last November. In addition, single-family starts in July were revised down somewhat. However, permit issuance for single-family construction—adjusted for activity where permits are not required—increased slightly in August and now stands well above the pace of starts. The excess of adjusted permits relative to starts and the increase in the backlog of unused permits suggest that single-family starts may move back up in September. In the multifamily sector, the pace of starts in August rose 6.3 percent to an annual rate of 357,000 units. However, the issuance of permits for multifamily housing construction dropped sharply last month, suggesting that multifamily starts may fall some in September. -2- Private Housing Activity (Millions of units; seasonally adjusted annual rate) 2001 2001 Q4 Q1 Q2r 2002 Juner Julyr Aug.p All units Starts Permits 1.60 1.64 1.57 1.64 1.73 1.69 1.67 1.67 1.69 1.71 1.65 1.71 1.61 1.67 Single-family units Starts Permits Adjusted permits1 1.27 1.24 1.28 1.26 1.23 1.26 1.37 1.31 1.34 1.33 1.27 1.31 1.34 1.29 1.34 1.31 1.28 1.32 1.25 1.30 1.32 New home sales Existing home sales 0.91 5.30 0.93 5.24 0.91 5.78 0.95 5.54 0.95 5.10 1.02 5.33 n.a. n.a. Multifamily units Starts Permits 0.33 0.40 0.32 0.41 0.35 0.39 0.34 0.40 0.35 0.41 0.34 0.43 0.36 0.37 Mobile homes Shipments 0.19 0.20 0.18 0.18 0.17 0.17 n.a. 1. Adjusted permits equals permit issuance plus total starts outside of permit-issuing areas. p Preliminary. r Revised. n.a. Not available. Private Housing Starts (Seasonally adjusted annual rate) 2.5 Millions of units 2.5 2.0 2.0 Total Aug. 1.5 1.5 Aug. 1.0 1.0 Single-family Multifamily 0.5 0.5 Aug. 0.0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 0.0 -3Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit Total 1. Adjusted1 2. Reported 3. 4. 5. 6. Securities Adjusted1 Reported Treasury & Agency Other2 Loans3 7. Total 8. Business 9. Real estate 10. Home equity 11. Other 12. 13. 14. Consumer Adjusted4 Other5 Level, Aug. 2002 ($ billions) 2001 Q1 2002 Q2 2002 June 2002 July 2002 Aug. 2002 4.2 5.1 1.0 -1.5 5.1 5.4 5.2 9.6 5.6 10.1 15.5 17.6 5,482 5,676 9.5 12.6 6.8 21.1 7.9 -2.0 1.3 -6.3 13.5 13.5 22.3 1.9 4.3 20.0 17.0 24.5 5.4 21.5 10.6 36.5 21.8 28.8 37.2 17.4 1,432 1,625 946 680 2.5 -3.6 7.2 19.9 6.1 -1.3 -6.6 3.8 25.6 1.8 2.3 -8.4 6.7 39.6 3.4 5.6 -7.5 14.9 41.5 12.0 5.7 -13.7 19.8 44.0 17.0 13.2 .2 20.0 30.0 18.9 4,051 987 1,902 197 1,705 3.8 7.4 -.3 5.3 5.2 -13.4 5.1 4.5 4.9 -1.7 3.4 6.0 -6.5 -3.8 6.2 21.8 3.8 5.6 577 923 585 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. The conversion from a thrift to a commercial bank charter added approximately $37 billion to the assets and liabilities of domestically chartered commercial banks in the week ending May 8, 2002. 1. Adjusted to remove effects of mark-to-market accounting rules (FIN 39 and FIN 115). 2. Includes private mortgage-backed securities, securities of corporations, state and local governments, and foreign governments and any trading account assets that are not Treasury or Agency securities, including revaluation gains on derivative contracts. 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. -4- III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2000 Change to Sept. 19 from selected dates (percentage points) 2001 2002 2002 June 26 Sept. 10 Aug. 12 Sept. 19 2000 June 26 2001 Sept. 10 2002 Aug. 12 Short-term FOMC intended federal funds rate 6.50 3.50 1.75 1.75 -4.75 -1.75 .00 Treasury bills 1 3-month 6-month 5.66 5.94 3.19 3.13 1.65 1.60 1.62 1.60 -4.04 -4.34 -1.57 -1.53 -.03 .00 Commercial paper (A1/P1 rates) 1-month 3-month 6.56 6.56 3.42 3.24 1.70 1.67 1.73 1.72 -4.83 -4.84 -1.69 -1.52 .03 .05 Large negotiable CDs 1 1-month 3-month 6-month 6.64 6.73 6.89 3.46 3.26 3.24 1.74 1.70 1.70 1.78 1.77 1.76 -4.86 -4.96 -5.13 -1.68 -1.49 -1.48 .04 .07 .06 Eurodollar deposits 2 1-month 3-month 6.63 6.69 3.41 3.26 1.72 1.68 1.77 1.74 -4.86 -4.95 -1.64 -1.52 .05 .06 Bank prime rate 9.50 6.50 4.75 4.75 -4.75 -1.75 .00 Intermediate- and long-term U.S. Treasury3 2-year 10-year 30-year 6.54 6.35 6.22 3.59 5.14 5.55 2.07 4.49 5.24 1.93 4.09 4.91 -4.61 -2.26 -1.31 -1.66 -1.05 -.64 -.14 -.40 -.33 U.S. Treasury 10-year indexed note 4.09 3.26 2.48 2.22 -1.87 -1.04 -.26 Municipal revenue (Bond Buyer) 4 5.99 5.25 5.36 5.05 -.94 -.20 -.31 7.38 7.15 7.64 8.40 12.30 5.62 5.64 6.30 7.11 12.72 4.76 4.81 5.79 7.23 13.51 4.33 4.44 5.39 6.77 13.13 -3.05 -2.71 -2.25 -1.63 .83 -1.29 -1.20 -.91 -.34 .41 -.43 -.37 -.40 -.46 -.38 8.14 7.22 6.89 5.64 6.31 4.37 6.18 4.32 -1.96 -2.90 -.71 -1.32 -.13 -.05 Instrument Private instruments 10-year swap 10-year FNMA 10-year AA 5 10-year BBB 5 High yield 6 Home mortgages (FHLMC survey rate) 7 30-year fixed 1-year adjustable Record high 2001 Change to Sept. 19 from selected dates (percent) 2002 Stock exchange index Dow-Jones Industrial S&P 500 Composite Nasdaq (OTC) Russell 2000 Wilshire 5000 Level Date Sept. 10 Aug. 12 Sept. 19 Record high 2001 Sept. 10 2002 Aug. 12 11,723 1,527 5,049 606 14,752 1-14-00 3-24-00 3-10-00 3-9-00 3-24-00 9,606 1,093 1,695 441 10,104 8,689 904 1,307 389 8,537 7,942 843 1,216 366 8,005 -32.25 -44.79 -75.91 -39.69 -45.73 -17.31 -22.81 -28.25 -17.06 -20.78 -8.59 -6.69 -6.92 -5.92 -6.23 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 Master II high-yield bond. 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. September 10, 2001, is the day before the terrorist attacks. August 12, 2002, is the day before the announcement after the most recent FOMC meeting. _______________________________________________________________________ BA:DAM -5- The International Economy U.S. International Transactions Trade in Goods and Services The U.S. international trade deficit in July was $34.6 billion. For the second quarter (which includes revised data for June), the trade deficit was $442 billion, s.a.a.r, $60 billion larger than in the first quarter and little changed from the previous estimate. The value of exported goods and services rose 1.3 percent in July following a similar-sized increase in June. Exports of goods were up 1.5 percent in July, owing largely to increases in exports of autos and aircraft. Exports of services rose about 1 percent, owing to moderate gains in travel, passenger fares, and other private services. Total exports of goods and services in July were about 2½ percent above the second-quarter level. The value of imported goods and services in July dropped nearly 1 percent from the elevated June level, with similar-sized percent declines in both goods and services. Among categories of goods, increases in industrial supplies and automotive products were more than offset by declines in both capital and consumer goods. The decline in services imports was mainly in royalties and license fees. The level of total imports of goods and services in July was about the same as the second-quarter level. -6- 

Federal Reserve (2002, September 23). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20020924_part2

@misc{wtfs_greenbook_20020924_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2002},
  month = {Sep},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20020924_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}