6/26-27/01

157

APPENDIX 1

Charts used by Mr. Kos.

March 1, 2001 - June 25, 2001
Percent 5.50 Current Deposit Rate and Rates Implied by Traded Forward Rate Agreements
FOMC -50 bps 3/20

3-Month Deposit Rates

Page 1

5.25 5.00 4.75 4.50 4.25 4.00 3.75 3.50
5.50 5.25 5.00 4.75 4.50 4.25 4.00 3.75 3.50
3/1 3/15

Inter-meeting -50 bps 4/18

FOMC -50 bps 5/15

Percent 5.50

5.25 5.00
9-Mo. Forward

4.75 4.50 4.25 4.00 3.75 3.50
6/21

LIBOR Fixing

United States
3/1 3/15 3/29 4/12 4/26 5/10
ECB -25 bps 5/10

3-Mo. Forward

5/24

6/7

Euro-area
LIBOR Fixing 3-Mo. Forward

5.50 5.25 5.00 4.75 4.50 4.25 4.00 3.75 3.50

9-Mo. Forward

3/29

4/12

4/26

5/10

5/24

6/7

6/21

Japanese Government Yield Curve
1.50 1.25 1.00 0.75 0.50
03/1/01 06/25/01

Japan

1.50 1.25 1.00 0.75 0.50 0.25 0.00

05/15/01

0.25 0.00
3 mos 6 mos 1 yr 2 yr 3 yr 4 yr 5 yr 6 yr 7 yr 8 yr 9 yr 10 yr

Page 2

2-Year Government Yields minus Central Bank Policy Rates

Basis Points

100 50

September 1, 2000 - June 25, 2001
FOMC 5/15 -50 bp

Basis Points

100 50

Germany Japan U.K.

0 -50 -100 -150 -200
9/1 10/1
Canada

0 -50 -100
U.S.

-150 -200

11/1

12/1

1/1

2/1

3/1

4/1

5/1

6/1

Basis Points

2-Year Swap Rates minus Central Bank Policy Rates
September 1, 2000 - June 25, 2001
FOMC 5/15 -50 bp Basis Points

120 80 40
Japan Euro-Area

120 80

U.S.

40 0
Canada U.K .

0 -40 -80 -120
9/1 10/1 11/1 12/1 1/1 2/1 3/1 4/1 5/1 6/1
Policy Rates: US: Federal Funds Rate (O/N), Euro area: Main refinancing rate (2-week), Japan: Overnight Call Rate, U.K.: Base Rate (O/N repo), Canada: Overnight Target (midpoint of bank rate and discount rate)

-40 -80 -120

Source: Bloomberg

Percent
6.00 5.75 5.50 5.25 5.00 4.75 4.50 4.25 4.00 3.75
3/1 3/15 3/29

March 1, 2001 - June 25, 2001
30-Year Bond

U.S. Treasury Yields

Page 3 Percent
6.00 5.75 5.50 5.25 5.00 4.75
2-Year Note

Fed Funds Target

10-Year Note

4.50 4.25 4.00 3.75

4/12

4/26

5/10

5/24

6/7

6/21

Basis Points
140 130 120 110 100 90 80 70 60
3/1 3/15

U.S. Credit Spreads over Treasuries
March 1, 2001 - June 25, 2001
Inter-meeting -50 bps 4/18
FOMC -50 bps 3/20 FOMC -50 bps 5/15

Basis Points 140
130 120 110 100 90 80 70

10-Year A1 Industrial Corporates

10-Year Interest Rate Swaps

10-Year Fannie Mae Benchmark
3/29 4/12 4/26 5/10 5/24 6/7 6/21

60

High Yield and EMBI+ Spreads over Treasuries
Basis Points

March 1, 2001 - June 25, 2001

Basis Points

900 850 800

FOMC -50 bps 3/20

FOMC -50 bps 5/15

900 850 800
EMBI+

750 700 650 600
3/1 3/15 3/29 4/12 4/26 5/10 5/24 6/7 6/21

750 700
Inter-meeting -50 bps 4/18

650
Merrill Lynch High Yield

600

Page 4 Index 4/17 = 100

125
120
115
110
105
100
95

FOMC -50 bps 5/15

April 17, 2001 - June 25, 2001

Nasdaq Composite Index

U.S. Equities

Index 4/17 = 100

125
120

Russell 2000 Index

Dow Jones Industrial Average

115
110

S&P 500 Index

105
100
95

4/17

5/1

5/15

5/29

6/12

6/26

Index 4/17 = 100
115

Nikkei

April 17, 2001 - June 25, 2001

Foreign Equities

Mexican Bolsa

Index 4/17 = 100
115
110

110

CAC 40 Index

105
100
95

4/17
5/1
FTSE 100 Index
FOMC -50 bps 5/15

DAX Index

105
100
95

5/15

5/29

6/12

6/26

Percent

34
32
30
28
26
24
22
20

4/17

Implied Volatility on the S&P 100 Futures

April 17, 2001 - June 25, 2001

FOMC -50 bps 5/15

Percent

34
32
30

VIX Index

28
26
24
22
20

5/1

5/15

5/29

6/12

6/26

Dollars per Euro
1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 0.80
Jan-99 Apr-99 Jul-99

January 1, 1999 to June 25, 2001 Euro-Dollar Exchange Rate

Page 5 Dollars per Euro
1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 0.80

Oct-99

Jan-00

Apr-00

Jul-00

Oct-00

Jan-01

Apr-01

Basis Points
320

Dollar minus Euro Interest Rate Differentials
3-Month Libor Deposit Rate Spread 2-Year Swap Spread

Basis Points
320

240

240

160

160

80

80

10-Year Swap Spread
0 0

-80
Jan-99 Apr-99 Jul-99 Oct-99 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01

-80

Percent
17 16 15 14 13 12 11 10 9 8 7
Jan-99

One-Month and Twelve-Month Euro-Dollar Implied Volatilities
1-Month

Percent
17 16 15 14 13 12

12-Month

11 10 9 8 7

Apr-99

Jul-99

Oct-99

Jan-00

Apr-00

Jul-00

Oct-00

Jan-01

Apr-01

Page 6

$ Billions

Currency Component of M1 (excludes vault cash)
Seasonally Adjusted $ Billions
575 565
Current Estimates (7% growth over forecast period)

575 565 555 545
Actuals

555 545 535 525 Dec Jan
2001

Estimates as of May FOMC meeting (5% growth over forecast period)

535 525 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2000 $ Billions

Total Outright Purchases and Net SOMA Expansion
Net Portfolio Expansion Purchases to Offset Redemptions

$ Billions

80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001
May Forecast

80 70 60 50 40 30 20 10 0 2001
Current Forecast

6/26-27/01

158

APPENDIX 2

Charts used by Messrs. Sichel, Struckmeyer, Fuhrer, and Steindel.

STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

Material for

Staff Briefings on Productivity Developments
June 26, 2001

Figure 1

Distribution of Quarterly Productivity Growth Rates 1995 – 2001:Q1,

12

Nonfarm Business Sector

12

10

10

Number of Quarters

Mean = 2.468 6 6

4

4

2

2

0 --1 0 1 2 3 4 5 6 7 8

0

Productivity Growth Rate

Quarterly Growth of Nonfarm Business Sector Productivity, 1995 – 2001:Q1
10 Growth < 1.1 8 1.1 < Growth < 3.4 3.4 < Growth < 5.8 6 Percent Growth 5.8 < Growth 6 Percent Growth 8 10

4

4

2

2

0

0

-2

-2

Source: U.S. Bureau of Labor Statistics: Nonfarm Business Sector, Output per Hour (SAAR, percent change).

Number of Quarters

8

8

19 95 :Q 1

19 : 95 Q 3

19 : 96 Q 1

19 : 96 Q 3

19 : 97 Q 1

19 : 97 Q 3

19 : 98 Q 1

19 : 98 Q 3

19 : 99 Q 1

19 : 99 Q 3

20 : 00 Q 1

20 : 00 Q 3

20 : 01 Q 1

Figure 2

Results of Multiple Breakpoint Tests for Shifts in Trend Productivity Growth

Simple regression: Log(prod) = c + b Timet
12 10 Quarterly Growth (SAAR) 8 6 4 2 0 -2 1.2 1.4 1.5 2.4

Actual Productivity, qtrly growth (SAAR)
-4 -6 1972 1976 1980 1984 1988
a

23 qtrs. min. spacing
1992 1996 2000

Cyclical controls added
12 10 Quarterly Growth (SAAR) 8 6 4 2 0 -2 -4 -6 1972 1976 1980 1984 1988 1.5 1.0 1.7

1.2

2.4

1992

1996

2000

Including capital services per hourb
12 10 Quarterly Growth (SAAR) 8 6 4 1.5 2 0 -2 -4 -6 1972 1976 1980 1984 1988 1992 1996 2000 1.6 0.7 1.7 1.7

a Cyclical regressors include the growth rate in real GDP and the civilian unemployment rate. b Capital services per hour are log-detrended interpolated values of the BLS annual series. An HP-filtered series yields nearly identical breakpoints and estimated trend rates of growth. Note: Minimum spacing between breakpoints is 23 quarters (20% of sample). Source: U.S. Bureau of Labor Statistics: Nonfarm Business Sector, Output per Hour (quarter-to-quarter percent change, SAAR).

Figure 3

Structural Labor Productivity Growth

6.0

Greenbook Forecasts vs. Real-Time "Actual" Productivity Data

6.0

5.0

Real-Time Actual Productivity Data (average of most recent 4 quarters available at Greenbook publication, SAAR) Average Greenbook Forecast for final two years in forecast horizon Greenbook Forecast for 2001
8/16/2000

5.0

4.0 Percent Growth

4.0

3.0

Overall increase in 1.4 percentage points + 2001 forecast:

Overall decrease

in

2001 forecast:

3.0

- 1.2 percentage

2.0

Chain-weighted data begins Feb., 1996

9/29/1999

points 6/21/2001

2.0

1.0

Memo: June 2001 Greenbook Structural Labor Productivity (Q4/Q4 pct. change) 1999: 3.1 2000: 3.2 2001: 2.5

1.0

0.0

0.0

Greenbook Publication Date
Source: Federal Reserve Board of Governors: Greenbook, Part 1; Nonfarm Business Sector, Output per Hour. Real-time data series is actual output

per hour (seasonally adjusted, at an annual rate), and is the average of the last 4 quarters available at the Greenbook's publication. Forecasts are taken from the Greenbook, either from tables or from references to trends in structural labor productivity growth.

Percent Growth

1/ 25 /1 99

6/ 28 /1 99 5

11 /8 /1 99 5

3/ 21 /1 99 5

8/ 15 /1 99 6

12 /1 3/ 19 6

5/ 15 /1 99 96

9/ 24 /1 99 7

1/ 28 /1 99 7

6/ 24 /1 99 8

11 /1 2/ 19 8

3/ 24 /1 99 98

8/ 18 /1 99 9

12 /1 5/ 19 9

5/ 11 /2 00 99

9/ 27 /2 00 0

1/ 25 /2 00 0

6/ 20 /2 00 1

10 /3 1/ 20 01 1

Table 1 Productivity Trends, 1960-2000

1960-1966 Labor Productivity Growth: Nonfarm Business Nonfinancial Corporations Manufacturing

1967-1973

1974-1995

1996-2000

3.4 2.9 2.7

2.6 1.9 3.0

1.4 1.5 2.7

2.8 3.1 4.9

Multifactor Productivity Growth BLS Estimates (Nonfarm Business): Jorgenson-Stiroh Estimates (Private Economy):

2.5 1.4

1.6 0.9

0.4 0.3

1.1 1.0 (1996-1999)

Table 2 Comments on Trend Productivity from Reports of the Council of Economic Advisors “…the trend rate of increase in output per man-hour in the total economy is just over 2 ½ percent per year.” 1967, p. 44. “…the trend rate of increase in output per man-hour in the total economy—private and public—is just over 2 ½ percent a year.” 1968, p. 68. “…the trend rate of increase in aggregate productivity—private and public—has been about 2 ½ percent per year.” 1969, p. 66. “In the private sector of the economy, [potential] output per man-hour is estimated to grow [from 1970 to 1975] by about 3.1 percent per year…” 1970, p.84 “The principal element in this computation [of the gross national product available] is an assumed 3­ percent trend rate of increase of productivity (output per labor-hour) in the private economy.” 1971, p. 94.

Chart 1
Multifactor Productivity of Nonfarm Business

5 5

4

4

3

3

2 Percent Change

2

1

1

0

0

-1

-1

-2

-2

-3

-3

-4 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

-4

Source: Bureau of Labor Statistics.

Chart 2
Nonfarm Productivity Growth: Actual and Forecast

6

5

4

Forecast
3

2

1

Actual

0

-1 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

Chart 3
Nonfinancial Corporate Profits as a Percentage of Sector Gross Product

7.0%

6.5%

6.0%

5.5%

5.0%

4.5%

4.0%

3.5%

3.0% Q1-1960

Q1-1962

Q1-1964

Q1-1966

Q1-1968

Q1-1970

Q1-1972

Q1-1974

Q1-1976

Q1-1978

Q1-1980

Chart 4
Real Interest Rates and the S&P Earnings/Price Ratio

8 0.16

6

Equilibrium Real Funds Rate Real Funds Rate Left Scale Real 10-Year Rate Left Scale

0.14

0.12

4 0.1

2

0.08

0.06 0

-2

E/P Ratio Right Scale

0.04

0.02

-4 Q1-1960

0 Q1-1962 Q1-1964 Q1-1966 Q1-1968 Q1-1970 Q1-1972 Q1-1974 Q1-1976 Q1-1978 Q1-1980

Note: Real rates are nominal rates less four quarter growth in the core PCE price index. Equilibrium real funds rate estimated by Board staff using statistical filter.

6/26-27/01

159

APPENDIX 3

Charts used by Mr. Stockton, Mr. Wilcox, and Ms. Johnson.

STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

Material for

Staff Presentation on the Economic Outlook
June 26, 2001

Chart 2

Near-term Dynamics and the Industrial Sector
Inventory-Sales Ratio*
50 Day’s Supply May Tech Sector 45 Non-tech Sector 58 May 40 57 Day’s Supply 59

Inventory-Sales Ratio*
60

35 1998 1999 2000 2001 1998 1999 2000 2001
*Industrial Production system. *Industrial Production system, excludes transportation.

56

Computers and Communication Billions of dollars, ratio scale Equipment
Three-month moving averages

Other Equipment (ex. aircraft)
Billions of dollars, ratio scale 24 Three-month moving averages 46 21 Orders Shipments 18 May 44 May 48

Orders

Shipments

May 42 May

15 1998 1999 2000 2001 1998 1999 2000 2001

40

Manufacturing Industrial Production
Percent change, annual rate 90 Quarterly Tech (Computers, Communications, and Semiconductors) 60

Manufacturing Industrial Production
Percent change, annual rate 8 Quarterly Non-tech ex. Motor Vehicles 4

30

+ 0 –

+ 0 –

4

30 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002

8

Chart 3

Near-term Developments
Sales of Light Vehicles

Millions of units, annual rate
20 75
Quarterly
Foreign 70
15
65
Domestic 10
60
5
55
Day’s supply (left scale) 11
12
Quarterly Domestic production (right scale) 13

Production and Day’s Supply of Light Vehicles

Days Millions of units, annual rate
14

0 50
1998 1999 2000 2001
1998 1999 2000 2001 2001

10

Housing Starts

Millions of units, annual rate
2
Quarterly
1.5

Total Real PCE

Billions of 1996 dollars, ratio scale
7000
Monthly Real PCE Multis Real PCE ex. tax effects 6700
6400
6100
5800
0.5 5500

Singles

1

0
1998 1999 2000 2001
1998 1999 2000 2001

5200

Initial Claims

Thousands
600
Four-week moving average
500
June 16
400

Payroll Employment Changes

Thousands of employees
Three-month moving average Private service producing ex. wholesale trade and help supply 300

200

100
May +
0

Manufacturing, wholesale trade, and help supply May 200
200
1998 1999 2000 2001
100

300

1989

1992

1995

1998

2001

Chart 9

Outlook for Inflation
Actual and Structural Productivity Growth
Four-quarter percent change 6 5 4 3 Structural 2 1 + 0 – 1 1990 1993 1996 1999 2002 1990 1993 1996 1999 2002
5 Short-run effective NAIRU 6 Actual 7

Unemployment Rate
Percent 8

4

3

PCE Energy Prices
Four-quarter percent change 30

Inflation Expectations

Percent
3.6 Michigan SRC
One-year ahead, median
3.2 10 + 0 – Q1 10
FRB Philadelphia One-year ahead 20
2
1995 1997 1999 2001
June 2.8

20

2.4

1995

1997

1999

2001

Inflation
Four-quarter percent change 3 Core CPI - current methods 2.5 Core GDP 2

1.5 Core PCE

1 1995 1996 1997 1998 1999 2000 2001 2002

Chart 11

Exchange Rates and Interest Rates
(Weekly data)

Nominal Exchange Rates
Foreign currency per U.S. dollar July 2, 1999 = 100 130

Long-Term Interest Rates
Percent 8

120
Euro 110

United States 6
Germany 4

100
Major currencies* 90
Yen 1999 2000 2001 80
1999 Japan 2000 2001
0 2

*Trade-weighted average against major currencies.

Three-Month Interest Rates
Percent 8

Eurocurrency Futures Yield Curves
Percent As of June 25, 2001 Dollar 5
4
3
2
2
1
Yen 2001 0 2001 2002
0 6

United States

6
Euro

Euro Area

4

Japan 1999 2000

Broad Stock Price Indexes
July 2, 1999 = 100 160

High-Tech Stock Price Indexes

July 2, 1999 = 100
240

DJ Euro

140
Neuer Markt 120

200

160

S&P 500 100
NASDAQ TOPIX 80
80
JASDAQ 120

1999

2000

2001

60

1999

2000

2001

40

Chart 12

Trade Developments
Goods Exports by Region Recent Developments: Exports and Imports
Change in billions of dollars, SAAR Billions of dollars, SAAR 200 Q4-Q1 Mar-Apr 180 Mexico 100 120

1. Goods Exports 2. Capital goods

-5.2 1.5 -5.4 -5.5 3.3 -4.5 1.8 -3.3 -29.2 -10.1 -11.7 -8.6 -6.1 -0.9 -0.4 4.7

-21.1 -17.6 -8.6 0.4 0.7 -4.6 -0.5 -21.6 -32.5 5.9 -33.2
160 Other Asia 100 Western Europe* 180 120 1999 2000 2001 1999 2000 2001 40 140 Canada 160 Other L.A. 60 80

of which:
3. 4. 5. 6. Computers and semi. Automotive Consumer goods Other

7. Services 8. Total Goods and Services 9. Good Imports 10. Oil 11. Capital goods

180

120

200

of which:
12. Computers and semi. -13.7 7.7 -14.3 1.4 0.1 -32.4 13. Automotive 14. Consumer goods 15. Other 16. Services

140

80

160

120

Japan

60

140

17. Total Goods and Services -24.4

100 1999 2000 2001

40 1999 2000 2001
*Excludes gold.

120

Oil Prices
Dollars per barrel Current WTI 35 30

Real Exchange Rate Outlook*
1999Q1 = 100 120

115 25 Jan. Greenbook WTI Major Foreign 20 15 10 100 5 1999 2000 2001 2002 0 1999 2000 2001 2002 95 Broad Dollar 110

105

*Import/export weighted average.

Chart 13

Foreign Outlook
Real GDP Growth
Percent change, SAAR* United States Total foreign** 7
6
5
4
H2 H1 3
2
1
2000
2001 2002
0 2000
*U.S. export weights.

Foreign Real GDP Growth*
Percent change, Q4/Q4 Industrial countries
Asia Latin America 7
6
5
4
3
2
1
2001 2002
0

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2. **U.S. export weights.

Latin America
140

Nominal Exchange Rates
Foreign currency per U.S. dollar Weekly 130
July 2, 1999 = 100

Stripped Brady Bond Yield Spreads over Percentage points U.S. Treasuries
Weekly
Argentina

20

16

Brazil 120
Brazil 110
Mexico Argentina 100
Mexico

12

8

4

1999

2000

2001

90

1999

2000

2001

0

Industrial Production
July 1997 = 100, SA 120
115
Mexico Brazil 110
105
100
95
Argentina 1997 1998 1999 2000 2001 90
85

Real GDP Growth
Percent change, SAAR*

2000

2001 2002
H1 H2
0.4 0.1 1.2 1.0 2.9 3.1 2.0 1.6 4.1 4.4 2.9 1.9

1. Latin America**

4.8 5.2 4.2 -2.0

of which:

2. 3. 4. Mexico Brazil Argentina

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2.
**U.S. export weights.

Chart 14

Asia
Nominal Exchange Rates
Foreign currency per U.S. dollar Weekly July 2, 1999 = 100 Thailand 125 120 115 Korea 110 4 105 Korea China 100 95 Taiwan 1999 2000 2001 90 1999 2000 2001 Thailand 0 2 6

Offshore-Dollar Bond Yield Spreads over Percentage points U.S. Treasuries
Daily Philippines

8

Worldwide Semiconductor Shipments versus Asian Semiconductor Producer IP
20 18 16 14 12 10 8 Billions of dollars June 1996 = 100 150 140 130 Asian Semiconductor Producer IP* 120 110 100 90

Worldwide Semiconductor Shipments

1995

1996

1997

1998

1999

2000

2001

*SA, 3-month moving average of Korean, Malaysian, Philippine, Singaporean, and Taiwanese IP weighted by shares of total U.S. exports.

Share of High-Tech Goods*
Percent

Real GDP Growth
Percent change, SAAR*

in IP

in Total Exports** 31 31 55 57 57

2000

2001 2002 H1 H2 3.0 7.5 2.5 1.0 4.0 1.7 4.7 7.6 4.2 3.8 5.7 4.0

1. Korea 2. Taiwan 3. Singapore 4. Malaysia 5. Philippines

12 18 47 20 11

1. Developing Asia** 6.1 0.7 of which: 2. China 7.4 7.0 3. Korea 5.2 1.6 4. Taiwan 4.1 -1.4 5. Singapore 11.0 -5.8 6. Hong Kong 6.6 1.2

*Includes semiconductors, computers and components, and telecommunications equipment and parts. Data for some countries include other electronic and electrical devices. **Data are 1998-2000 average. Data for Singapore are for 2000 only.

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2. **U.S. export weights.

Chart 15

Industrial Countries
Industrial Production
July 1999 = 100, SA Euro Area 108 100 106 Canada 104 Japan 102 80 100 98 70 -15 -20 90 Japan -5 -10 Canada 0 110 110

Business Confidence
1999Q3 = 100 Diffusion index Euro Area 5 10

1999

2000

2001

1999

2000

2001

Employment
July 1999 = 100 104 2

Consumer Confidence
Diffusion index 1999Q3 = 100 110

Canada Euro Area 102 Canada -2 100 -4 Euro Area 95 100 0 Japan 105

Japan

1999

2000

2001

98

-6

1999

2000

2001

90

Real GDP Growth
Percent change, SAAR*

Real Domestic Demand Growth
Percent change, SAAR*

2000 1. Indust. countries** 3.1 of which: 2. 3. 4. 5. Japan Euro Area

2001 2002 H1 H2 1.4 1.8 2.7 1. Japan 2. Euro Area 3. United Kingdom 4. Canada

2000

2001 H1 H2 -0.6 0.8 2.7 1.4 -1.4 2.0 2.8 2.8

2002

2.5 2.3 2.9 2.7

0.9 2.5 2.7 3.0

2.5 -1.0 -1.3 2.9 1.8 1.6 1.9 1.9 2.4 2.4

1.0 2.6 2.6 3.1

United Kingdom 2.6 Canada 3.5

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2. **U.S. export weights.

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2.

Chart 16

External Sector
Determinants of Core Exports
Percent change, Q4/Q4 Core export growth Contr. of for. GDP growth Contr. of rel. prices Ind. output gap growth 16

Determinants of Core Imports
Percent change, Q4/Q4 20 Core import growth Contr. of GDP growth Contr. of rel. prices 16

Contribution to U.S. GDP Growth
Percentage points Exports Imports 3 2 1

12

8

12 0

4

8 -1

0

4

-2 -3

2000

2001

2002

-4

2000

2001

2002

0

2000

2001

2002

Real Export Growth
Percent change, Q4/Q4

Real Import Growth

Percent change, Q4/Q4

1999 2000 2001 2002
Growth of real exports 1. G & S 4.3 6.7

1999 2000 2001 2002
Growth of real imports 1. G & S 12.0 11.3

-0.9

5.1

0.5

7.3

Percentage point contribution 2. Services 0.1 0.8 0.3 3. Goods 4.2 5.9 -1.2 of which: 4. Core* 2.3 3.6 -0.1
*Excludes computers and semiconductors.

1.6 3.5 1.3

Percentage point contribution 2. Services 0.4 2.0 0.7 3. Goods 11.6 9.3 -0.2 of which: 4. Core* 9.5 6.9 0.4
*Excludes computers, semiconductors, and oil.

0.8 6.5 4.5

Current Account
2 Percent Billions of dollars
200

Capital Flows
Billions of dollars, AR

2000
0 Level -2 Percent of GDP -4
-400 -200 0

2001Q1
17 -11 295 591 2 -114 168 -144

Official capital, net of which: Japan Private capital, net of which: For. purch. of U.S. sec. of which: Treasuries U.S. purch. of for. sec. For. D.I. in U.S. U.S. D.I. abroad

36 19 407 433 -53 -125 288 -152

-6

1990

1992

1994

1996

1998

2000

2002

-600

Chart 17

ECONOMIC PRO JECTIONS FOR 2001

FOMC

Range

Central Tendency

Staff

-------------Percen tage c hang e, Q4 to Q4-----------­ Nominal GDP
February 2001

3¼ to 5
( 3 ¾ to 5 ¼ )

3½ to 4¼
(4 to 5)

3.6
(3.8)

Real GDP
February 2001

1 to 2
( 2 to 2 ¾ )

1¼ to 2
( 2 to 2 ½ )

1.4
(1.8)

PCE Prices
February 2001

2 to 3
( 1 ¾ to 2 ½ )

2 to 2½
( 1 ¾ to 2 ¼ )

2.0
(1.8)

--------------Average leve l, Q4, percen t--------------­

Une mplo yme nt rate
February 2001

4¾ to 5
(4½ to 5)

4¾ to 5
( A b ou t 4½ )

5.2
(5.2)

Central tendencies calculated by dropping high and low three from ranges.

ECONOMIC PRO JECTIONS FOR 2002

FOMC

Range

Central Tendency

Staff

-------------Percen tage c hang e, Q4 to Q4-----------­ Nominal GDP Real GDP PCE Prices 4½ to 6 3 to 3½ 1½ to 3 5¼ to 5½ 3 to 3¼ 2 to 2½ 5.3 3.5 1.7

--------------Average leve l, Q4, percen t--------------­

Une mplo yme nt rate

4½ to 5½

4¾ to 5¼

5.6