STRIClzY C \ETA O’ ?

I L

(FR) CLASS II-FOMC

Materials for

July 7, 1987

0

3eficit-reducing actions of about $25 billion in FY1988.

Other
0 Foreign

exchange value of the dollar declines at somewhat less than a 0 Dercent annual rate. Little further change in the price of crude oil.

0
r

Chart 2

Federal Budget

r
FY86 FY87 FY88

1
(actual) Staff -_
1014 845 169

Staff --_
1054 886 168

Congressiona Resolution
1041 933 108

Outlays Receipts Deficit memo:
Gramm-Rudman Target

990 769

22 1

172

144

108

BUDGET DEFICIT RELATIVE TO GNP

Percent o f Potential GNP Percent of GNP

1-

0

I

I

I

I

I

I

i1

Chart 3

REAL GNP

Percent change# 0 4 to 0 4

I-

GNP DEFLATOR

Percent change, 0 4 to 0 4

r d
1

I

5

LO66

4

Raal
GNP

Net

Exports 2.4 1.8 1.0

3

1986 2.0 1987 3.0 1988 2.3

2
1

88

0

2.1

4 [986 3

2
1

I

3.5
1987 1988

3.8

1986

1987

1988

0

r

CIVILIAN UNEMPLOYMENT RATE

Percent

Q 4 Level 1986 1987 1988 6.9 6.3 6.3

-

I

Chart 4

NONFARM EMPLOYMENT Arrrag8 monthly chango, thourandr
c

-130
dun.

Manufacturing

(Second bar)

- 128
- 126
- 124

200 100

4
1906
DOMESTIC AUTO MARKET

I

- 122

' 120

1987

r I

Mlllionr of unite. ar

REAL CONSUMPTION LESS AUTOS Parcant chango, af

n,

1

l2

Ti:
-4
1986 1987

I
1986

I
1987

4

-

HOUSING STARTS AND SALES
V I c - s c! units, ar Million8 of unltr. ar

30

BUSINESS INVESTMENT
Billions of dollars Billionr of dollarr

r

Shipments.

9 22
-

1986 1987 Shipmontm of nondrtanrr capit81 goods. Nonnmldmtlal conrtructlon put In place.

Chart 5

I

I

1

1

I

I

1

1

I

1

I

I

1

1

I
Psrcent --3

CURRENT ACCOUNT AS PERCENT OF GNP

r-

c

r1

-4

I

1

I

1

I

I

I

I

1

1

1

1

1

I

Ram1 intmlest rat-s era celculated using a 36-month cantend moving anrags of Inflation rates, using stat t forwxrts rhere necessary. .'Wdghted av'.ngm dollar against othw 0-10 curnnclas using total 1972-76 avanga trade adjusted by r*iative consumw prices.

ChU4 6

WHOLESALE PRICES
Percent change from year aarller

COMMODITY PRICES

Index. ~anuary1982 = 1 0 0 Economist Index In Foreign Currencies"

In U.S. Dollars

1983

1985

1987

1983

1985

1987

60

OIL PRICES

Dollars per barrel
45

Spot Price o f
West Trxao Intermediate

35

<

U.S. Import Prkr

- 25 - 15
5

,-------

1

I

I

I

I

I

Chart 7

CONSUMER PRICES

r=

r=

Percent change. 04 to 04

United Statas
Foreign Industrial Countries" (Secondbar)

1984

1985

1986

1987

1988

ECONOMIC ACTIVITY:
Real GNP"""

JAPAN AND EUROPE""
Percent change, 04 t o 04

I Real p
c

Total Domestic Demand""" (Second bar)

l6

1984

1985

1986

1987

1988

ECONOMIC ACTIVITY: WORLD
Percent change, 0 4 t o 04

US. Real GNP
=All
Foreign Countries R e a l GNP""" (Secondbar)

-6

-4s
I

-4

1

3

1984

1985

1986

1987

.

L
1988

0

Weighted emn of tho aix maJor forelgn Induetrial countrlea ualng total 1992-76 amn h d L . Oermany, FNnc* Italy. a n t t h e Unlted Kingdom * **.Weighted avenge ualng US. non-agrlcultunl axporta. 1978-83.

r

Prices of Non-oil Imports'
percsntGh8nge
1 1

1WMl

1

r

Volumes of

Non-oil Imports'

-

Percent change. annual rate

GiiC7isB(K11

1. Food

5

-1 1
10

1. Food
2. Industrial Supplies
3. Capital Goods

10

- 1

8

1

2. Industrial Supplies
3. Cap&dGoods
4. Automothre 5. ConsumerGoods

4
2

8
24
10

8
3
2

8

8
6

4. Automotive
5. Consumer Goods

0 6

14
13

6. Total W i l

8. Total Non-oli

4

* NA PI

lndexea

'Excluding gold

PRICE OF NON-OIL IMPORTS
Ratio 8 c a I ~
index. 1982 = 100

NON-OIL IMPORTS
Ratio 8COle. billion8 Of 1982 dOll8r8

460

c

Ratio 8cai0, billion8 of d O l l ~ 8

Chart 9

Volume
/ ‘

_--6036

Volume

-

- 4

40

0

--c-

5

/

-

3240


/

- 30
28

Value

0

0

0

Value

3

I

I

I

I

I

20 24

I

I

I

I

I

20

-

Volumes of Nonagricultural Exports’
Percent change

Ratio 8 C S b , billion8 O f 1982 dollar8

Ratio meaim, bllllon8 of dOllSl8

1
-1

1. Industrial Supplies

g

2. Capital Goods (ex. aircraft)
3. Automotive
4. Consumer Goods

4
-4 -1

10

7 17 11

5. All Other
6. T0t.I

13

Non8~rlcultural

150

1984

1986

1968

4ok
4
\

Surplus Deficit Real GNP Net Exports of Goods and Services
/

40

4
- 40
,
/
/

40

-

\

80

/

- 80
120

/
/
/

120

Current Account Balance

, ,

,
/

/

160

1984 1986

‘I----

/

.. ‘
I
I

160

1988

Billions of Dollars, Net lniiows

U.S. Capital Transactions =+

1. Nei Private and Official Capital

80
86

98
106

117
84

38
22
16 2

133
84 49

2

Private Capital
U.S. and Foreign Official Capital

3.
4.

-6
-9 3 0

-8
-7

33
-2 31 4

United Stales‘ G.10 Countries Other

2
45

5.
6

0
-1

15
-1

2
21

7 Statistical Discrepancy
Memo:
8.

27

1 8

24

-1

Current Account Intervention U S Purchases of Dollars G-10 Purchases of Dollars
~~

- 107
0
-4

- 116
-4

- 141
0 21

- 37
2 35

- 154
n.a. n.a.

9.
10.
~

- 14

: Projectea ‘1-cludes CIS ollic~alreserve assets and olhei U S governmenl assels “O!lfers *,om data published by the Department 01 Commerce on June 16 because 01 later dam revisions

Chert 11

MANUFACTURING OUTPUT

r

Index, 1984 01 = 100 Other
10 1

-

Total IP Pwcent ch8nge Ye8r ended June 1985 Ye8r ended
June 1986

1.5

105

.5

Tredr Sensitive Industries
100

Yeor ended
June 1987

3.0~

1

1984

I

1985

I

I
1986 1987

95

CONSUMER PRICE INDEXES Percent ch8noc 8r

CONSUMER PRICE INDEXES Parcent Ch8nOc er -I 1 8

t

h e r En8rgy
Totel lerr Energy

6

/
- 4

I8rr Food 8nd En*rgy

Commodities

4

Total

- 2

2

198s ..~

1986

1987

0

1985

1906

1987

"

PRODUCER PRICES OF INTERMEDIATE MATERIALS AND SUPPLIES

r

1d nK .

DOC.

1986

8

100

INFLATION EXPECTATIONS

Percent

Excluding Food 8nd Energy

1
May

io3

1102

6

6

1984 1985 1986 1987

99

4

1984

1985

1986

1987

3

ChUt 1P

EMPLOYMENT COST INDEX Porcmt chsngr from yrar rariirr

UNEMPLOYMENT RATES

Ponrnt

r ~ l m t lndU8try r
Service-producing

1
6 4

2

lo

- 0

1984

1985

1986

1987

1

1

1

1

1

1

1

1

1

1

12

1978

18 91

1984

1987

EMPLOYMENT COST INDEX Porcmt changr from yrar rarlirr

r
-

REGIONAL UNEMPLOYMENT RATES Porcont

Prlntr IndU8try

South

1
-8

l2 -J 1 0

r
-

1 l2
1 0

- Northoart

8

1978

Northeast

6

4

18 91

1984

1987

.

1978

18 91

1984

1987

COMPENSATION AND CONSUMER PRICES
Rrcrnt changr from y u aarlirr o

Real Cornpenration

.
6

Comprn8rtion per Hour (04to Q4 chmgd

2

1984

1986

1986

1987

1988

0

Chart 13

RATIO OF REAL CONSUMPTION AND NET EXPORTS TO GNP

4r

Percent

Percent

1
Consumption
*

68 66
64

,
Net Exports

/

60

I

I

I

I

1

I

I

I

1

I

1

I

I

24

PCE
1986 H1 H2 1987 H1 H2 1988 4.9 3.1 0.7 2.1 1.0

DPI
6.8 -2.3 -0.6 4.7
1.1

Percent change. ennu81 retc 1982 dollera Nondurrbles end Services (Second bar)
16

8

4
8

Percent
10
7

Ratio

-Saving

Rate

-I

5.2

4.8

4.4

2

I

I

1

1

1

I

I

I

I

I

I

I

I

I

I

-?
I

4

I

L

1969

1972

1975

1978

1981

1984

1987

3.6

Chart 14

HOUSING STARTS

Millions a f units. annual fate

r-

2

-

Total Housing S t a r t s Millions of units Total Single
1.19 1.17 1.10

-

Multi
.63 .49 .47

1.5

1986 1987 1988

1.82 1.66 1.57

1

05
.

1984

1985

1986

1987

1988

MORTGAGE PAYMENT AS PERCENT

NEW MORTGAGE COMMITMENT RATES

OF- HOUSEHOLD INCOME
Fixed-rate loan

Percent

32

r
1984 198s 1986

Parcani -. - -. . .

18

15

r-

SELECTED HOUSEHOLD BORROWING Billions o f dollars. annual rate

% 1 20 24 16 1984 1985 1986 1987

12

9

u
1987 6

Househ aId S e c t o r D e b t Growth
400

Installment Credit

1

Percent

300

200

1986 1987

100
~

1988

1984

1985

1986

1987

1988

"

Chwt 16

r i'
J

REAL BUSINESS FIXED INVESTMENT Porcont Ch8ng0,

onnu81 r8to

Roal Business Fixod Invostmmt

I Producoro' Dumb10 Equipmont
Nonreoidont/ol Structuros (secondbar)

rn

d
3.6 1 0 1900 2.0

I
1986 1987

1
1980

NONDEFENSE CAPITAL GOODS ORDERS Billiono O f dOllW0

-

6-month movino mvoraeo

-

29

NONRESIDENTIAL BUILDING CONTRACTS Billiono O f d O l l W 0

r

6-month movlne 8vongo

-6

- 5.5
Tot81

--L e s s Aircraft and Parts
1985 1986 1901

23

- 6

20

*

4.5

1985

1986

1987

INVENTORY-SALES RATIO
I-

Nonfarm Inventory RItiO

Invrrtmmt
Billions of

-

Conetat hilaw

1982 dOllOfS

annual rate

0 t h Manufacturing ~
and T n d a

1906 a4 1907

-9.8
32.8 19.9 15.5

-

ai
Retail Autos

I
1982

a2 I2 4
1988

22.9

1
1983
1984

1
190s

1
1906

I
1987

1

Billion8 of dOllW8. annual nt8

1

4s0

1986

1987

NET FUNDS RAISED BY NONFINANCIAL CORPORATIONS BSlllonr of donar8, annual rote

1::r
ilOO

1988

Equitioe BllllOn8 1r8u.r Of088
O f dOllW8

-

Retir8mOnt8

1986

38

19
1 14
0

I1987

44

r

COMPOSITION OF BORROWING
Nonf inancial Corpontionr

1986

1987

1988

1

200

10 0

-

Chart 17

REAL STATE AND LOCAL GOVERNMENT PURCHASES
Percent change. 0 4 t o 0 4

STATE AND LOCAL SURPLUS

r

Billions o f dollars. ar

Operating and Capital Account

1

30

1985

1906

1987

1988

- v

1985

1986

1987

1988

REAL FEDERAL PURCHASES
Prrcant changa, 0 4 to 0 4

TOTAL BORROWING BY DOMESTIC NONFINANCIAL SECTORS

F

Total
Total less CCC (Second bar)

tn n

tn

r

Billions

Of

dOll@rE

Households and Businesses

1

US.. State and

Loc8l Govarnmrntr

looo 4800

1

I2O0

198s

1986

1987

1988

. I

1985

1986

907

1988

Chart 18

Forecast Summary
7

-

Board Members Range Median Presidents Range Median Staff

Percent change, 04 to Q4

Nominal GNP 1987

6M 6% 231 to 3 2 to 3 3t04 2Mt04 3y4 331t04% 2% 231 3 2y4

1988
Real GNP 1987

1988
GNP Deflator 1987

3%
4%

3b

3%

1988
Average level, Q4, percent

3%

3% to 5

Unemployment Rate 1987

6.1 to 6.5 5.9 to 6.8

6.2 6.4

6.2 to 6.5 6.0 to 6.7

6.4 6.2

6.3

1988

6.3

Previous FOMC Projections for 1987
c
-

Reported to Congress Feb. 19, 1987
Range

-

Central Tendenc)

Percent change, Q4 to 0 4

Nominal GNP Real GNP GNP Deflator
Average level, Q4, percent

431 to 731 2 to 4 231 to 4

5% to 6%
231 to 3 3 to 3M 631 to 6%

Unemployment Rate

6M to 6%