Greenbook/Tealbook

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Content last modified 5/20/2009. Confidential (FR) Class III FOMC May 2, 2003 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 Labor Market Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Productivity and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Sales of Light Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Manufacturers’ Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Purchasing Managers Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Construction Put in Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Annual Benchmark Revision to Retail Sales and Inventories . . . 16 Tables Changes in Employment . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Selected Unemployment and Labor Force Participation Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Labor Productivity and Costs . . . . . . . . . . . . . . . . . . . . . . . 5 Sales of Automobiles and Light Trucks . . . . . . . . . . . . . . . 6 Changes in Manufacturing Inventories . . . . . . . . . . . . . . . 8 Manufacturers’ Inventory-Shipment Ratios . . . . . . . . . . . . 9 Equipment and Software Spending Indicators . . . . . . . . . 10 Charts Private Payroll Employment Growth . . . . . . . . . . . . . . . . . 2 Aggregate Hours of Production or Nonsupervisory Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Labor Force Participation Rate and Unemployment Rate . 3 Employment-to-Population Ratio . . . . . . . . . . . . . . . . . . . 3 Persons Working Part-Time for Economic Reasons . . . . . 3 Days’ Supply of Autos . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Days’ Supply of Light Trucks . . . . . . . . . . . . . . . . . . . . . . 6 Average Value of Incentives on Light Vehicles . . . . . . . . 6 Michigan Survey Index of Car-Buying Attitudes . . . . . . . 6 Sales of Medium and Heavy Trucks . . . . . . . . . . . . . . . . 10 Net New Orders of Trucks . . . . . . . . . . . . . . . . . . . . . . . . 10 Recent Data on Orders and Shipments . . . . . . . . . . . . . . 11 Purchasing Managers - Manufacturing . . . . . . . . . . . . . . 12 Purchasing Managers’ Index . . . . . . . . . . . . . . . . . . . . . . 13 Nonresidential Construction . . . . . . . . . . . . . . . . . . . . . . 15 -iiThe Domestic Financial Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Tables Commercial Bank Credit . . . . . . . . . . . . . . . . . . . . . . . . . 17 Selected Financial Market Quotations . . . . . . . . . . . . . . . 18 Supplemental Notes The Domestic Nonfinancial Economy Labor Market Developments The labor market weakened further in April. Private nonfarm payrolls declined 80,000, and the unemployment rate rose 0.2 percentage point to 6.0 percent. Moreover, the average workweek of production or nonsupervisory workers fell 0.3 hour in April, pushing the index of aggregate hours down 0.7 percent to its lowest level since November 1998. In addition, this week’s report on claims for unemployment insurance indicated that initial UI claims were continuing to run close to 450,000 per week in the period subsequent to the week surveyed for the April labor market report, a level consistent with another sizable drop in payrolls in May. In the payroll survey, job losses last month were concentrated in manufacturing, which shed 95,000 jobs—more than double the average monthly decline in the first quarter. Declines among manufacturers were widespread, and the one-month diffusion index of manufacturing payrolls slipped to 33.8, the lowest level since December 2001. Within manufacturing, employment in transportation equipment fell 27,000 in April, partly as a result of motor vehicle assembly plant shutdowns aimed at reducing high inventories. In addition, the fabricated metals and the electronic and other electrical equipment industries experienced sizable employment losses. Employment declines last month were also evident in industries closely related to manufacturing, including a cutback of 6,000 jobs in wholesale trade and a loss of 14,000 jobs in the help supply industry. Outside of manufacturing and related industries, the largest reduction in employment occurred in transportation and public utilities, which lost 19,000 jobs in April. Air transportation and trucking and warehousing accounted for most of these losses, while communications posted a second small monthly gain following twenty two straight monthly losses. Retail trade employment declined 10,000 last month after larger declines in previous months. Employment in services rose 21,000 in April, following two months of declines. The services figure was held down by continued losses in hotels and lodging and in amusement and recreation, both of which have experienced much smaller seasonal buildups than usual. The construction industry added 18,000 jobs in April, after a similar gain in the previous month. Employment in the finance, insurance, and real estate industry also increased last month. Finally, governments added 32,000 jobs, largely as a result of hiring by local governments for education. -2- CHANGES IN EMPLOYMENT (Thousands of employees; based on seasonally adjusted data) 2002 2002 Nonfarm payroll employment1 Previous Private Mining Manufacturing Construction Transportation and utilities Retail trade Wholesale trade Finance, insurance, real estate Services Help supply services Total government Total employment (household survey) Q3 2003 Q1 Q4 -Average monthly change-18 31 -53 -91 -18 31 -53 -87 -38 4 -75 -88 -1 -1 0 1 -51 -39 -62 -36 -8 2 -4 -2 -14 -22 -13 -13 -14 -6 -46 -12 -5 -6 -9 -0 6 13 14 7 49 61 44 -32 7 -11 -1 -15 20 27 22 -4 Feb. 2003 Mar. Apr. -353 -357 -370 3 -58 -45 -39 -121 -3 12 -119 4 17 -124 -108 -88 0 -43 19 -9 -33 0 7 -29 -54 -36 -48 ... -80 4 -95 18 -19 -10 -6 7 21 -14 32 31 310 -291 303 -128 -60 339 Memo: Aggregate hours of private production workers (percent change)1,2 -0.2 Average workweek (hours)1 34.2 Manufacturing (hours) 40.8 -0.7 34.1 40.8 0.1 34.2 40.7 -0.4 34.2 40.8 -1.0 34.1 40.8 0.5 34.3 40.8 -0.7 34.0 40.5 Note. Average change from final month of preceding period to final month of period indicated. 1. Survey of establishments. 2. Annual data are percent changes from Q4 to Q4. Quarterly data are percent changes from preceding quarter at an annual rate. Monthly data are percent changes from preceding month. ... Not applicable. Private Payroll Employment Growth Aggregate Hours of Production or Nonsupervisory Workers (Strike-adjusted data) Thousands of employees 400 154 1982 = 100 154 300 300 152 152 200 200 150 150 100 100 148 148 400 1-month 0 3-month moving average 0 Apr. 146 -100 Apr. -200 144 144 142 142 140 -200 -300 -300 -400 -400 140 -500 138 -500 146 -100 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 138 -3- SELECTED UNEMPLOYMENT AND LABOR FORCE PARTICIPATION RATES (Percent; based on seasonally adjusted data) 2002 2002 Civilian unemployment rate (16 years and older) Q3 2003 Q1 Q4 Feb. 2003 Mar. Apr. 5.8 5.8 5.9 5.8 5.8 5.8 6.0 Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 16.5 9.7 4.7 4.6 16.7 9.6 4.7 4.6 16.1 9.9 4.9 4.6 17.2 9.2 4.9 4.4 17.1 9.3 4.9 4.5 17.7 8.9 4.9 4.6 18.0 10.1 5.1 4.7 Labor force participation rate 66.6 66.6 66.5 66.3 66.3 66.2 66.4 Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 47.4 76.4 75.9 59.4 47.6 76.6 76.0 59.3 46.8 75.8 75.6 59.4 45.2 75.5 75.3 59.6 45.5 75.6 75.5 59.5 44.1 74.8 75.3 59.6 45.0 75.5 75.6 59.8 Labor Force Participation Rate and Unemployment Rate Percent 67.4 Percent 7.0 Participation rate (left scale) 67.2 6.5 Apr. 67.0 6.0 66.8 5.5 66.6 5.0 Apr. 66.4 Unemployment rate (right scale) 66.2 66.0 4.5 1994 1995 1996 1997 1998 4.0 1999 2000 Percent 65.0 64.5 64.5 64.0 64.0 63.5 63.5 63.0 63.0 62.5 Apr. 62.5 2002 (Percentage of household employment) 4.0 3.5 2003 Persons Working Part-Time for Economic Reasons Employment-to-Population Ratio 65.0 2001 Percent 4.0 3.5 62.0 1994 1996 1998 2000 2002 62.0 3.5 Apr. 3.0 3.0 2.5 2.5 2.0 1994 1996 1998 2000 2002 2.0 -4- The rise in the unemployment rate in April was widespread, as most major demographic groups experienced an increase. Meanwhile, the labor force participation rate moved up 0.2 percentage point to 66.4 percent, still a very low level. Average hourly earnings of production or nonsupervisory workers on private nonfarm payrolls increased 0.1 percent in April. Over the twelve months ending in April, the change in average hourly earnings was 3.1 percent, just under the 3.2 percent rise recorded over the previous twelve months. Productivity and Costs Output per hour of all persons in the nonfarm business sector rose at an annual rate of 1.6 percent in the first quarter, reflecting a 1.4 percent increase in output and a 0.1 percent decline in hours worked of all persons. Over the four quarters ending in 2003:Q1, productivity rose 2.3 percent, well below the preceding year=s 4.4 percent advance and slightly below the average pace of productivity growth since the mid-1990s. Hourly compensation of all persons in the nonfarm business sector rose at an annual rate of 3.5 percent in the first quarter. Over the past four quarters, compensation per hour increased 3.3 percent, more than double the pace of the preceding year. This acceleration likely owes in large part to the behavior of stock options, whose exercise value probably fell sharply over the four quarters ending in 2002:Q1 and contributed to that period’s low growth in compensation per hour. Unit labor costs rose 1.9 percent in the first quarter and 0.9 percent over the four quarters ending in 2003:Q1, following a 2.9 percent decline over the four quarters ending a year earlier. Productivity in the nonfinancial corporate sector rose at an annual rate of 5 percent in 2002:Q4 and 4.7 percent over the four quarters of last year, well above the average increase since the mid-1990s. Hourly compensation rose 4.9 percent in the fourth quarter and 3.9 percent over the past year. Strong productivity growth combined with moderate increases in hourly compensation caused unit labor costs to fall 0.8 percent over the four quarters of 2002 after falling 1.8 percent in 2001. Sales of Light Motor Vehicles Light vehicle sales moved up to an annual rate of 16.4 million units in April, 400,000 units above the pace in March. The rise was concentrated in sales of domestically-produced light trucks, which increased by 0.6 million units. In contrast, sales of domestically-produced cars and of foreign-produced cars and light trucks fell in April. Overall sales in April likely were boosted by the high level of incentives. Data from J.D. Power and Associates indicate that average incentives in April were -5Labor Productivity and Costs (Based on seasonally adjusted data) 2002 2003 2002:Q1 to Item 2001 1 1 2002 Q2 Q3 Q4 Q1 2003:Q1 1.9 1.9 1.2 4.0 4.1 4.2 1.8 1.7 4.2 5.8 5.5 5.5 0.3 0.7 -0.5 2.2 1.6 2.1 2.5 2.3 2.8 3.3 4.7 5.8 3.4 5.0 n.a. n.a. 1.5 1.4 2.1 3.3 3.2 3.9 4.3 4.0 5.0 2.2 1.8 1.4 3.6 3.9 5.4 3.9 3.5 4.8 3.5 3.3 4.1 1.4 3.9 4.5 2.9 4.9 n.a. n.a. -0.4 -0.5 1.0 -0.7 -0.9 -0.3 2.4 2.3 0.7 -3.4 -3.4 -3.9 3.3 3.2 5.9 1.7 1.9 2.7 1.0 0.9 1.3 -1.8 -0.8 -1.3 -0.5 -0.1 n.a. n.a. Output per hour Total business Nonfarm business Manufacturing Nonfinancial corporations2 Compensation per hour Total business Nonfarm business Manufacturing Nonfinancial corporations2 Unit labor costs Total business Nonfarm business Manufacturing Nonfinancial corporations2 NOTE: Percent change from preceding period at compound annual rate. 1. Changes are from fourth quarter of preceding year to fourth quarter of year shown. 2. The nonfinancial corporate sector includes all corporations doing business in the United States with the exception of banks, stock and commodity brokers, finance and insurance companies; the sector accounts for about two-thirds of business employment. -6Sales of Automobiles and Light Trucks (Millions of units at an annual rate, FRB seasonals) 2002 2003 2003 2002 Q3 Q4 Q1 Feb. Mar. Apr. 16.7 17.6 16.5 15.8 15.3 16.0 16.4 8.1 8.6 8.5 9.1 7.9 8.6 7.7 8.1 7.3 8.0 7.7 8.3 7.5 8.8 North American1 Autos Light trucks 13.5 5.9 7.6 14.3 6.2 8.1 13.3 5.7 7.6 12.5 5.5 6.9 12.1 5.2 6.9 12.5 5.5 7.0 13.0 5.4 7.6 Foreign-produced Autos Light trucks 3.3 2.2 1.1 3.4 2.3 1.1 3.2 2.2 1.1 3.4 2.2 1.2 3.2 2.1 1.1 3.5 2.2 1.3 3.4 2.1 1.3 .40 .43 .41 .37 .38 .36 n.a. Total Autos Light trucks Memo: Medium and heavy trucks Note. Components may not sum to totals because of rounding. Data on sales of trucks and imported autos for the most recent month are preliminary and subject to revision. 1. Excludes some vehicles produced in Canada that are classified as imports by the industry. Days’ Supply of Autos Days’ Supply of Light Trucks Days Days 80 100 Big Three Mar. Mar. 70 Big Three 80 60 Mar. 60 Mar. 50 1998 1999 2000 2001 2002 2003 30 40 Other 40 Other 1998 1999 2000 2001 2002 2003 20 Michigan Survey Index of Car-Buying Attitudes Average Value of Incentives on Light Vehicles Index 2800 Apr. 27 170 2100 160 1650 1200 Apr. 750 150 140 130 2001 2002 2003 Note. Weighted average of customer cash rebate and interest rate reduction. Data are seasonally adjusted. Source. J.D. Power and Associates. 300 1998 1999 2000 2001 2002 2003 120 -7- roughly $2,200, the highest level in the three-year history of the series. However, anecdotal reports from our industry contacts suggest that consumers’ response to incentives were weaker than expected last month. Manufacturers’ Inventories The book value of manufacturers’ inventories decreased at an annual rate of $1.5 billion in March, following an upward-revised $23 billion accumulation in February. Shipments moved up 1.9 percent in March, and the manufacturing inventory-shipments ratio edged down to 1.32 months, a very low level by historical standards. For the first quarter as a whole, manufacturers’ inventories rose at an $8.6 billion rate, slightly above the pace of accumulation in the fourth quarter.1 Stocks held by manufacturers of durable goods declined at an annual rate of $6.7 billion in March, with a fourth consecutive month of large liquidations of computers and electronic products more than accounting for this drop. For the durable goods category as a whole, shipments rose 0.9 percent, and the stock-toshipments ratio moved down to 1.53 months. In the nondurable sector, inventories increased at an annual rate of $5.2 billion in March, with no noticeable movements in any particular category. Shipments of nondurable goods increased 3 percent, and the stock-to-shipments ratio dropped to 1.08 months. Revised data on orders and shipments of nondefense capital goods in March, which were released with the report on manufacturers’ inventories, are summarized in updated versions of the table and chart that appeared on pages II-22 and II-24 of Greenbook, Part 2. Excluding aircraft, the change in new orders was revised up from 3.2 percent to 4.4 percent in March, as a downward revision in bookings of computers and related equipment was more than offset by a large upward revision in orders of railroad rolling stock. Revisions to shipments were small. Purchasing Managers Index The April reading from the Institute for Supply Management’s (ISM) Report on Business suggests that manufacturing activity contracted further last month. The overall purchasing managers’ index edged down 0.8 index point to 45.4, its second consecutive month below 50 and its fourth consecutive monthly decline. The new orders diffusion index, the component of the overall PMI that is most useful for forecasting near-term movements in industrial production, also was below 50 for a second month, consistent with a moderate decline in manufacturing IP last month. The diffusion index for new export orders was at 1. The pace of manufacturing inventory investment in the first quarter was a little weaker than what the BEA had assumed for the advance GDP release. -8- Change in Manufacturing Inventories (book value, billions of dollars at annual rate) 2002 Sector Total manufacturing Excl. aircraft Durable goods Lumber and wood prod. Nonmetalic minerals Primary metals Fabricated metals Machinery Computer and electronic prod. Electrical equip. Transportation equip. Motor vehicles Aircraft Furniture Other durables Nondurable goods Food Beverage and tobacco Textiles Textile products Apparel Leather and allied prod. Paper products Printing Chemicals Petroleum and coal Rubber and plastics Stage of Processing Materials and supplies Work in process Finished goods 2003 2002 2003 Q1 Dec. Jan. Feb. Mar. Q2 Q3 Q4 -12.8 -11.3 4.6 9.9 6.3 .5 8.6 9.3 32.8 6.4 4.3 5.3 23.0 24.8 -1.5 -2.2 -14.5 -.8 .0 -.5 -3.2 -5.0 -6.1 -.5 -.2 1.9 -1.6 .2 1.6 -7.8 -.3 .1 .5 1.4 -1.7 -1.9 -1.4 -5.7 1.6 -5.2 .0 1.2 6.9 -.5 .4 1.3 .1 .4 -1.0 -1.4 7.2 .1 5.8 .0 .4 -4.5 .5 1.0 1.3 -.4 -2.4 -6.4 -.1 1.6 .2 -.7 .3 .0 33.1 -1.2 .6 1.3 -.1 3.5 -3.4 -1.3 31.7 2.1 26.4 -.4 2.4 -5.1 .4 .3 2.3 -.8 -5.1 -6.2 .5 2.2 3.4 -1.0 .5 .8 -1.7 1.4 1.2 1.9 -.1 -2.4 -5.5 -.7 3.6 1.7 -1.8 -.6 -.4 -6.7 -.3 1.6 -.2 -.2 .3 -7.5 -.2 -.9 -4.5 .7 1.1 -.4 1.6 1.6 .2 -.9 .5 -.9 .0 -.6 .6 -.6 1.4 .2 12.5 1.6 .3 -.3 .4 .4 .3 -.2 -.4 4.7 2.2 3.6 -.6 -.3 -1.5 -.3 -.2 -.1 .3 .5 .7 -.9 1.0 .1 13.1 3.0 -.2 .4 .1 .8 .1 .6 -.2 3.9 1.9 2.8 -.3 -2.4 .6 .6 .4 .7 .2 .2 .0 -6.9 6.9 -.5 9.4 1.6 -.4 .3 .7 1.2 .2 .0 -.3 -1.4 4.9 2.5 24.7 3.8 .1 .4 .1 .4 -.1 .2 .1 13.6 2.7 3.3 5.2 3.6 -.4 .4 -.4 .7 .1 1.4 -.4 -.5 -2.0 2.7 -10.9 -2.5 .6 -2.4 -2.1 9.1 -7.0 5.8 7.4 1.3 3.7 3.5 -12.0 29.4 15.4 8.1 4.1 -8.0 4.2 5.5 13.2 -8.4 1.6 5.3 -9- Manufacturers’ Inventory-Shipments Ratios 2002 2003 2002 2003 Sector Q2 Q3 Q4 Q1 Dec. Jan. Feb. Mar. Total manufacturing Excl. aircraft 1.33 1.24 1.32 1.24 1.33 1.24 1.33 1.24 1.34 1.25 1.32 1.22 1.34 1.25 1.32 1.23 Durable goods Lumber and wood prod. Nonmetalic minerals Primary metals Fabricated metals Machinery Computer and electronic prod. Electrical equip. Transportation equip. Motor vehicles Aircraft Furniture Other durables 1.52 1.27 1.05 1.62 1.45 1.95 1.62 1.43 1.38 .53 4.38 1.24 1.78 1.50 1.28 1.05 1.62 1.44 1.94 1.60 1.42 1.33 .53 4.28 1.25 1.79 1.53 1.24 1.06 1.67 1.46 1.98 1.62 1.37 1.42 .56 4.56 1.26 1.73 1.53 1.28 1.10 1.71 1.48 1.98 1.56 1.42 1.42 .56 4.61 1.30 1.73 1.56 1.24 1.05 1.68 1.47 2.01 1.65 1.38 1.51 .60 4.85 1.23 1.71 1.52 1.27 1.04 1.67 1.48 1.98 1.56 1.39 1.41 .55 5.14 1.26 1.76 1.55 1.31 1.11 1.74 1.49 2.01 1.62 1.44 1.41 .57 4.38 1.30 1.76 1.53 1.26 1.11 1.73 1.48 1.97 1.56 1.43 1.42 .56 4.38 1.33 1.70 Nondurable goods Food Beverage and tobacco Textiles Textile products Apparel Leather and allied prod. Paper products Printing Chemicals Petroleum and coal Rubber and plastics 1.10 .85 1.58 1.38 1.42 1.56 2.03 1.16 .74 1.37 .72 1.11 1.12 .86 1.61 1.39 1.49 1.58 2.03 1.11 .72 1.42 .72 1.17 1.10 .85 1.62 1.41 1.44 1.57 2.30 1.13 .74 1.37 .70 1.15 1.10 .87 1.62 1.45 1.50 1.64 2.17 1.12 .75 1.36 .63 1.21 1.10 .84 1.65 1.47 1.44 1.56 2.52 1.11 .74 1.37 .67 1.15 1.09 .85 1.63 1.40 1.50 1.58 2.24 1.11 .75 1.33 .66 1.17 1.11 .87 1.67 1.46 1.52 1.66 2.10 1.13 .76 1.38 .65 1.21 1.08 .87 1.56 1.48 1.49 1.64 2.16 1.09 .74 1.34 .60 1.20 322.5 324.2 323.4 326.3 321.0 327.3 Memo: Manufacturing shipments (billions of dollars) 322.6 328.7 - 10 - EQUIPMENT AND SOFTWARE SPENDING INDICATORS (Percent change from preceding comparable period; based on seasonally adjusted data, in current dollars) 2002 Q4 2003 Q1 2003 Feb. Jan. -Annual rate- Mar. - - -Monthly rate - - Shipments of nondefense capital goods Excluding aircraft Computers and peripherals Communications equipment All other categories -7.2 -6.4 -8.6 -12.6 -5.3 -3.9 -0.4 5.7 25.6 -4.2 1.1 3.1 19.7 8.3 -0.1 -1.4 -3.5 -14.0 -1.7 -1.8 1.4 1.6 -6.3 2.2 2.9 Shipments of complete aircraft -33.7 n.a. -8.5 37.5 n.a. Medium & heavy truck sales (units) -15.7 -32.0 -3.5 2.2 -5.6 -7.9 -1.4 5.4 26.3 -5.0 2.6 15.1 -16.2 191.6 7.8 1.9 5.2 0.9 46.9 1.8 -4.9 -2.4 -13.1 -0.0 -0.8 3.0 4.4 -0.7 0.6 5.8 Orders for nondefense capital goods Excluding aircraft Computers and peripherals Communications equipment All other categories n.a. Not available. Sales of Medium and Heavy Trucks Net New Orders of Trucks Thousands of units 700 Thousands of units 700 Annual rate; FRB seasonals Classes 3-8 550 500 650 550 Annual rate; FRB seasonals 3-month moving average 500 650 450 600 600 550 550 500 500 450 Class 8 400 400 350 350 300 300 250 250 200 200 Classes 5-7 450 450 150 150 Mar. 400 350 100 100 50 50 400 Mar. 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source. Ward’s Communications 350 0 1996 1998 2000 Note. Net orders are less cancellations. Source. ACT Research Co. 2002 0 - 11 - Recent Data on Orders and Shipments Computers and Peripherals Billions of dollars 11 11 Shipments Orders 10 10 9 9 8 8 7 7 Mar. 6 5 1995 1996 1997 1998 1999 2000 2001 2002 2003 6 5 Communications Equipment 16 Billions of dollars 16 13 13 10 10 7 7 Mar. 4 1 4 1995 1996 1997 1998 1999 2000 2001 2002 2003 1 Other Equipment (Total Ex. Transportation, Computers, Communications) 48 Billions of dollars 48 46 46 44 44 42 Mar. 42 40 40 38 38 36 36 34 1995 1996 1997 1998 1999 2000 2001 2002 2003 34 - 12 05-01-03 Purchasing Managers - Manufacturing (Seasonally adjusted) Index Index 80 New orders 80 70 70 Production 60 60 50 50 Apr. Apr. 40 New export orders 40 Employment 30 1992 1994 1996 1998 2000 20 2004 2002 30 1992 1994 1996 1998 2000 2002 Index 20 2004 Index 100 80 Prices paid * 90 70 Supplier deliveries* 80 60 70 Apr. 60 Apr. 50 50 40 Inventories 40 30 30 1992 1994 1996 1998 2000 2002 * Positive entries represent slower deliveries. 20 2004 1992 1994 1996 1998 * Not seasonally adjusted. 2000 2002 2004 20 - 13 05-01-03 Purchasing Managers’ Index (Seasonally adjusted) Index 65 60 55 50 Apr. 45 40 1984 1986 1988 1990 1992 1994 1996 1998 2000 35 2002 2004 Note. The Purchasing Managers’ Index (PMI) is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators (New orders, Productin, Vendor deliveries, Inventories, and Employment) with different weights applied. Seasonal adjustment is done by the U.S. Department of Commerce. Customer Inventories* Index 65 60 55 50 Apr. 45 40 1995 1996 1997 * Percent too high plus 1/2 (percent about right). 1998 1999 2000 2001 2002 2003 35 - 14 - 51.1 in April, a level indicative of expanding export orders but down 0.9 index point from its reading in March. The production index was about unchanged at 47 in April after dropping sharply in March. The employment index, which has not exceeded 50 since September 2000, edged down further in April to its lowest level since December 2001. In addition, purchasing managers continued to regard their customers’ inventories as too low. The diffusion index for prices dropped to 63.5 in April, with 37 percent of respondents reporting higher prices paid for purchased commodities, a decline of 10 percentage points from March. Nevertheless, prices were reported to have risen for a broad range of energy products—such as diesel fuel, gasoline, methanol, natural gas (also reported down in price), and fuel oil (also reported down in price)—and energy-intensive commodities, including chemicals, plastics, and resins. Corrugated containers, fuel oil, natural gas, steel, and wheat were reported as down in price. Acetone was the only commodity listed in short supply. The report indicated that the war in Iraq resulted in “few, if any, consequences to supply chains.” Going forward, purchasing and supply executives are primarily concerned with weak demand. Construction Put in Place The total nominal value of new construction put in place declined 1 percent in March, after rising 2.2 percent in January and 0.2 percent in February. In addition, estimates of the change in total construction spending in January and February were revised up 0.2 percentage point and 0.4 percentage point, respectively, as higher estimates for nonresidential and public construction more than offset reductions in residential expenditures. For the first quarter as a whole, nominal expenditures rose at a quarterly rate of 2.9 percent and real expenditures increased at a quarterly rate of 1.2 percent. These data were a little stronger than had been assumed by the BEA in its advance estimate of firstquarter GDP. In the private sector in March, nominal residential construction outlays edged up 0.1 percent, after much stronger increases in the first two months of the year. For the first quarter, spending on residential structures rose at a quarterly pace of 5.6 percent, with substantial increases in both single-family and multifamily construction and a small rise in improvements. Nominal nonresidential construction spending edged down 0.1 percent in March. Nevertheless, for the first quarter as a whole, nominal expenditures on nonresidential construction rose 1.4 percent, the first quarterly increase since early 2001. The first-quarter rise reflected small upturns in outlays for industrial structures and lodging and miscellaneous structures, as well as a healthy increase in non-office commercial construction. Expenditures for office - 15 - Nonresidential Construction (Seasonally adjusted, annual rate) Total Building Ratio scale, billions of dollars 225 225 165 Mar. 115 65 165 115 1980 1982 1984 1986 1988 1990 1992 1994 Other Commercial 1996 1998 2000 65 2002 Institutional 69 64 Ratio scale, billions of dollars 69 64 46 40 Ratio scale, billions of dollars 46 Mar. 40 57 Mar. 57 35 35 50 50 30 30 43 43 25 25 36 36 20 20 29 29 15 15 22 10 22 1985 1990 1995 2000 Office 1985 1990 1995 10 2000 Industrial 66 Ratio scale, billions of dollars 66 47 Ratio scale, billions of dollars 47 58 58 41 41 51 51 36 36 44 44 31 31 37 26 26 30 30 21 21 23 23 16 37 Mar. 16 Mar. 16 1985 1990 1995 2000 16 11 1985 1990 1995 2000 11 - 16 - construction fell 2.9 percent in March and were down 2.3 percent in the first quarter, after a decline of 4.7 percent in the fourth quarter. In the public sector, construction spending dropped 3.5 percent in March. For the first quarter as a whole, public construction was unchanged in nominal terms. Annual Benchmark Revision to Retail Sales and Inventories The Census Bureau released revised data on retail sales and inventories that incorporate new data on sales and inventories from the 2001 Annual Retail Trade Survey (including revised information back to 1999) and use updated seasonal adjustment factors. The Census also presented consistent monthly estimates on a NAICS basis developed for the period since December 1997 for sales and since January 1992 for inventories. This revision pushed down the twelve-month change in nominal retail sales by 1.1 percentage points in 2001 and pushed up the twelve-month change by 0.1 percentage point in 2002. The percentage change in retail control, which excludes sales at motor vehicle dealers and at building material and supply stores, was revised down 0.3 percentage point in 2001 and 0.4 percentage point in 2002. However, the increase in retail control in the first quarter of this year was revised up, pointing to a 1/2 percentage point upward adjustment to the BEA’s estimate of the annual rate of growth in real personal consumption expenditures in the first quarter. The book-value of retail inventories excluding motor vehicles was revised up 0.7 percent in 2001, 0.8 percent in 2002, and 0.7 percent in January and February of this year. As a consequence of the revisions to sales and inventories, the inventory-sales ratio was revised up slightly over the past two years, although its general pattern is unchanged. - 17 Commercial 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 and agency Other2 Loans3 7. Total 8. Business 9. Real estate 10. Home equity 11. Other 12. 13. 14. Consumer Adjusted4 Other5 Level, Apr. 2003p ($ billions) Q4 2002 Q1 2003 Feb. 2003 Mar. 2003 Apr.p 7.1 7.1 12.4 11.8 7.4 8.1 13.9 15.3 7.0 6.0 8.0 4.4 5,834 6,017 13.3 12.7 19.2 4.4 16.1 13.5 25.2 -2.6 11.9 14.0 17.1 9.5 26.3 29.8 30.3 29.1 11.1 7.3 11.2 1.4 14.3 1.5 26.7 -36.6 1,575 1,757 1,081 677 5.0 -6.9 13.1 36.7 10.8 11.1 -4.0 20.4 24.7 19.9 5.8 -5.9 13.4 26.2 11.9 9.4 -9.7 17.9 25.4 17.1 5.5 -8.7 7.3 38.3 3.6 5.7 -2.5 7.9 19.9 6.4 4,259 944 2,103 233 1,870 5.5 4.1 1.4 8.6 4.9 8.5 4.2 7.7 .3 2.2 7.4 17.8 -6.1 .5 33.4 -3.7 -.3 20.2 589 950 623 2002 2003 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. p Preliminary. - 18 - III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2000 2003 Change to May 1 from selected dates (percentage points) 2001 2003 June 26 Sept. 10 Mar. 17 May 1 2000 June 26 2001 Sept. 10 2003 Mar. 17 Short-term FOMC intended federal funds rate 6.50 3.50 1.25 1.25 -5.25 -2.25 .00 Treasury bills 1 3-month 6-month 5.66 5.94 3.19 3.13 1.13 1.12 1.08 1.10 -4.58 -4.84 -2.11 -2.03 -.05 -.02 Commercial paper (A1/P1 rates) 1-month 3-month 6.56 6.56 3.42 3.24 1.19 1.17 1.22 1.20 -5.34 -5.36 -2.20 -2.04 .03 .03 Large negotiable CDs 1 1-month 3-month 6-month 6.64 6.73 6.89 3.46 3.26 3.24 1.24 1.20 1.17 1.26 1.24 1.20 -5.38 -5.49 -5.69 -2.20 -2.02 -2.04 .02 .04 .03 Eurodollar deposits 2 1-month 3-month 6.63 6.69 3.41 3.26 1.22 1.17 1.26 1.22 -5.37 -5.47 -2.15 -2.04 .04 .05 Bank prime rate 9.50 6.50 4.25 4.25 -5.25 -2.25 .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 1.66 4.05 4.98 1.51 4.06 4.97 -5.03 -2.29 -1.25 -2.08 -1.08 -.58 -.15 .01 -.01 U.S. Treasury 10-year indexed note 4.09 3.26 1.91 2.08 -2.01 -1.18 .17 Municipal revenue (Bond Buyer) 4 5.99 5.25 5.06 5.09 -.90 -.16 .03 7.38 7.19 7.64 8.40 12.30 5.62 5.68 6.30 7.11 12.72 4.24 4.40 4.92 6.27 11.20 4.16 4.37 4.80 5.85 9.63 -3.22 -2.82 -2.84 -2.55 -2.67 -1.46 -1.31 -1.50 -1.26 -3.09 -.08 -.03 -.12 -.42 -1.57 8.14 7.22 6.89 5.64 5.61 3.68 5.79 3.79 -2.35 -3.43 -1.10 -1.85 .18 .11 Instrument Private instruments 10-year swap 10-year FNMA5 10-year AA 6 10-year BBB 6 High-yield 7 Home mortgages (FHLMC survey rate) 8 30-year fixed 1-year adjustable Record high 2001 Change to May 1 from selected dates (percent) 2003 Stock exchange index Dow-Jones Industrial S&P 500 Composite Nasdaq (OTC) Russell 2000 Wilshire 5000 Level Date Sept. 10 Mar. 17 May 1 Record high 2001 Sept. 10 2003 Mar. 17 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 8,142 863 1,392 365 8,163 8,454 916 1,473 399 8,698 -27.88 -40.01 -70.83 -34.20 -41.03 -11.99 -16.13 -13.14 -9.51 -13.92 3.84 6.20 5.77 9.15 6.56 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. Constant maturity yields estimated from Fannie Mae domestic non-callable coupon securities. 6. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. 7. Merrill Lynch Master II high-yield bond. 8. 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. March 17, 2003, is the day before the most recent FOMC meeting. _______________________________________________________________________ BA:DAM 

Federal Reserve (2003, May 5). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20030506_part1

@misc{wtfs_greenbook_20030506_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2003},
  month = {May},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20030506_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}