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fomc | 2,002 | Right. | 2 |
fomc | 2,002 | President Jordan. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. I also find it interesting to go through this kind of exercise, academic as it is, in part because it helps to get one thinking about what we can learn from our own historical experience and that of other countries. We also learn something about what the literature has had to say about these ki... | 1,268 |
fomc | 2,002 | Any more comments, gentlemen? President Broaddus. | 11 |
fomc | 2,002 | I had a very narrow follow-up question to the original question that I believe you raised, Mr. Chairman, about discontinuities. I would address it to Marvin. I thought I had asked him everything I needed to ask, but I guess I haven't! The key element that works in Marvin's mechanism is the broad liquidity premium and y... | 151 |
fomc | 2,002 | Yes, I think that's true. If this policy were known to be effective and all the pieces were in place to make it work, it's probably true that you could get by with a much smaller increase in the monetary base. That's because once people saw that it was going to work, they would be more optimistic about the future. As w... | 106 |
fomc | 2,002 | President Stern. | 3 |
fomc | 2,002 | I have a couple of comments by way of expressing some reservations or uncertainties. When I first looked at Marvin's work, I was reassured. It seemed as if there was a long list of options we might try and sort of roll on our own. But quantitatively I don't know the significance of any of this, and I don't know if ther... | 338 |
fomc | 2,002 | Okay. Why don't we take a coffee break and then we'll turn to the chart show. | 18 |
fomc | 2,002 | We will now have the chart show presented by David Wilcox, Larry Slifman, and Karen Johnson. | 22 |
fomc | 2,002 | 4 Thank you, Mr. Chairman. We will be referring to the material labeled "Staff Presentation on the Economic Outlook." Your first chart sketches the broad outlines of the staff projection. As you know from the Greenbook, we believe that economic activity is close to or at a trough. If this indeed turns out to be the cas... | 2,564 |
fomc | 2,002 | Let me turn now from the broad contours of our projection to some of the details. Chart 6 shows a few of the high-frequency production indicators that have influenced our judgments about the current state of the economy. One important indicator that has informed our thinking is private payroll employment (the upper lef... | 2,023 |
fomc | 2,002 | The staff's outlook for economic activity in the rest of the world is for a rebound to moderate growth this year, which strengthens somewhat next year. Although we already see tentative signs of positive developments in many regions, the projected recovery depends importantly on the projected acceleration in U.S. real ... | 3,366 |
fomc | 2,002 | Your last chart displays the projections that you submitted for this year. The central tendency of your projections for the growth of real GDP is revised down from the June meeting. Likewise, the central tendency of PCE inflation projections is revised down a notch from last year. We would now be pleased to address you... | 62 |
fomc | 2,002 | That was an excellent summary. Well done. Governor Ferguson. | 12 |
fomc | 2,002 | I have a couple of questions. On chart 8, is the semiconductor production chart normalized for advances in computing capacity? | 24 |
fomc | 2,002 | Yes. This is our industrial production index, which is actually constructed by looking at production on a chip-by-chip basis--at that level of detail. So by doing that we are accounting for changes in quality over time. | 44 |
fomc | 2,002 | Okay. What expectations do you have for real prices with respect to semiconductors? Presumably that's a key part of your production outlook. | 28 |
fomc | 2,002 | Well, there are two things going on. One, in the very short term D-RAM prices actually have shot way up, as you know, apparently because of demand. But over the longer haul, we expect a return--because of technological improvement--to the rapid rates of decline that we saw over the course of the 1990s, which would be o... | 84 |
fomc | 2,002 | If I may ask one more question, Mr. Chairman. The NBER Business Cycle Dating Committee, when they announced their call that we are in recession, put in an unusual sentence with respect to September 11 suggesting that they might not have made the call had the terrorist attacks not occurred. Does the staff have a perspec... | 96 |
fomc | 2,002 | I think what the Dating Committee was reacting to primarily was that until September 11 the depth criterion hadn't been met. It was that event, with the rapid falloff in activity after September 11, which in their minds pushed the preponderance of evidence over the line. | 55 |
fomc | 2,002 | It was also the duration issue as well, I think, because before September 11 people thought that the chances of the economy turning around in the short run were greater. | 34 |
fomc | 2,002 | Is there any chance those data may get revised so that the shallow recession will be very difficult to find without a magnifying glass? | 26 |
fomc | 2,002 | It's conceivable. Certainly Doug Elmendorf's and Karen Dynan's work with GDP data suggests that those data are susceptible to great revision. That's not the main focus of the Dating Committee's examination. They tend to rely on monthly indicators. But, as you know, the contours of those indicators can be revised on the... | 172 |
fomc | 2,002 | David, if I may ask, am I correct that the only statistic that peaked in March was employment? | 21 |
fomc | 2,002 | That's correct. | 3 |
fomc | 2,002 | Industrial production had peaked much earlier anyway. | 8 |
fomc | 2,002 | It peaked earlier--and several months earlier after the revision. | 12 |
fomc | 2,002 | Yes, but even with the revision the NBER dating was still valid. | 15 |
fomc | 2,002 | President Moskow. | 4 |
fomc | 2,002 | I just want to ask a question about the orders data, where we've seen some positive news. Of course, this was at a time when there was a strong expectation that a tax cut for business would be enacted to encourage orders. My recollection is that it was going to be retroactive--at least in the bill that was introduced--... | 113 |
fomc | 2,002 | That's certainly a possibility. But I'm not aware that we were hearing a great number of stories along those lines from our business contacts. | 26 |
fomc | 2,002 | You had done some survey work at that time as to what the impact of those tax cuts would be. Did you get any insights based on that? | 30 |
fomc | 2,002 | I agree with Larry. We did not hear any reports of actual anticipatory ordering on the basis of the possible enactment of that expensing provision. So while that's certainly a possibility, as you note, I don't think I would give much weight to that as being a factor. | 56 |
fomc | 2,002 | Excuse me. Why would a firm take anticipatory action when there's the chance that it would put itself on the wrong side of the date when the tax would take effect? | 35 |
fomc | 2,002 | Well, it was going to be retroactive. | 10 |
fomc | 2,002 | Well, business firms can't be sure of that. That's the point. The one thing they can be sure of is that the provision will be effective subsequent to the legislation. But they don't know how far back it would go, even if the Congress did make it retroactive. | 55 |
fomc | 2,002 | On this particular point, I heard some business contacts saying they were delaying orders, waiting until they saw the shape of the legislation. | 26 |
fomc | 2,002 | If anything, I think that was the kind of report that we were hearing from our business contacts as well. | 22 |
fomc | 2,002 | President Jordan. | 3 |
fomc | 2,002 | Dave, I have a question about the three-month diffusion index for payroll employment at the bottom of chart 2. Could you repeat what you said? I thought I heard you saying something about 300 large firms. | 43 |
fomc | 2,002 | The BLS puts out an array of these series. One set in the series has to do with the total private nonfarm sector; the other has to do with the manufacturing sector. This is from the former constellation. Within that there are one-month, three-month, and six-month diffusion indexes. This is the three-month version of th... | 125 |
fomc | 2,002 | Okay. Maybe you can help me out further. I have a question on the "contributions to the initial recovery in real GDP" illustrated at the bottom of chart 5 and the differences in the contribution of the consumer sectors--"interest-sensitive elements of household spending," I think is what you said. We went through a per... | 158 |
fomc | 2,002 | It's a truism that every business cycle is different, and no doubt that applies here as well. There is another factor going on in the background at the same time. While it may be that previously the recession itself was more concentrated in certain sectors, as you suggest, most of these earlier episodes were deeper as ... | 119 |
fomc | 2,002 | Okay, that helps me. Thank you. | 9 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | I have a couple of questions about the Greenbook projection. How much of the decline in consumption for the current quarter is model-driven and how much of that is judgmental, driven primarily I suppose by the assumption that the automobile surge in the fourth quarter was borrowed from this year? | 56 |
fomc | 2,002 | When we do our current-quarter estimate for consumption--2002:Q1 being the current quarter now--it pretty much is not model driven. | 29 |
fomc | 2,002 | So it's mostly judgmental? | 6 |
fomc | 2,002 | It's based on a several factors. One is the pattern of the monthly data as we move into the quarter. In part the PCE projection is driven by what we think we know about auto sales even in January, which plays a role there. So we're thinking about those kinds of things much more than any consumption model. | 64 |
fomc | 2,002 | What I'd like to press you on much more than that, though, has to do with the inventory situation. It seems to me that the outline that you have for business fixed investment and consumption makes a lot of sense, given what we know about those sectors. But during the near term, activity in those sectors is going to be ... | 283 |
fomc | 2,002 | An important consideration in our minds as we look beyond the current quarter or so is some notion of a target inventory-sales ratio. We think these target ratios have been on a downtrend for at least the past decade and maybe longer. In order to get a forecast that has a target inventory-sales ratio that behaves the w... | 193 |
fomc | 2,002 | That's certainly consistent with all the anecdotes we're hearing as well. That's exactly what they have in mind. | 20 |
fomc | 2,002 | Okay, let's recess until tomorrow morning. I understand that this room will be secure so if you'd like to leave papers here, feel free to do so. At 6:00 p.m. we will have cocktails--double martinis and the usual [laughter]--followed by a dinner during which we will honor Larry Meyer, who is still legally a Board member... | 88 |
fomc | 2,002 | We are now back in session. Before we go to a general Committee discussion of the economy, are there any residual questions left over from last night for the chart show participants? Yes, Governor Gramlich. | 41 |
fomc | 2,002 | I don't have a question. But maybe it would be helpful for everybody if the staff would just run down the GDP numbers released this morning and note how they compare with what was in the Greenbook. | 40 |
fomc | 2,002 | With the Chairman's permission? | 6 |
fomc | 2,002 | Please. | 2 |
fomc | 2,002 | I'd say a couple of things about this morning's GDP release. First of all, in broad terms the story is very similar to the one that we had in the Greenbook, which was that there was very strong growth in final sales in the fourth quarter and that was substantially met by a very significant liquidation of inventories. S... | 334 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | Are both the inventory and the international figures based on two months of data essentially? | 16 |
fomc | 2,002 | Yes, that's right. | 5 |
fomc | 2,002 | So it's all subject to possible revision. | 8 |
fomc | 2,002 | Indeed. And I would say that at least a part of the discrepancy on the inventory side is attributable to a different assumption for December; we had somewhat more runoff built into our forecast than BEA has. There are not just missing data but, of course, revisions to earlier figures as well. The retail sales number st... | 85 |
fomc | 2,002 | Further questions? | 3 |
fomc | 2,002 | I have one. | 4 |
fomc | 2,002 | You have a question or you want to start the Committee discussion? | 13 |
fomc | 2,002 | I have a question. | 5 |
fomc | 2,002 | Go ahead. | 3 |
fomc | 2,002 | First of all, I just wanted to say that I thought the chart show presentation yesterday was very well done and extremely clear on all the underlying factors of the Greenbook forecast. I was interested, though, in people's assessment of where they thought the major risks were, particularly in terms of the fragility of t... | 101 |
fomc | 2,002 | As you know, through the fall we highlighted the consumer sector as an area where we thought there were some potential risks, especially as the unemployment rate rose sharply and the labor market deteriorated. At least according to this preliminary estimate, it looks as if consumer spending rose 5.4 percent at a time w... | 648 |
fomc | 2,002 | Thank you. | 3 |
fomc | 2,002 | May I ask a question? Dave, the GDP price index, of course, was down. What was the PCE price index? The forecast in our projection was a little over 1 percent, but I have a feeling it was quite different. | 50 |
fomc | 2,002 | I don't know the answer to that but let me see if I can look it up quickly. It was 0.8 percent on the total price index, and the core was 2.8 percent. | 42 |
fomc | 2,002 | Core was affected by insurance premiums. That's the impression I got. | 13 |
fomc | 2,002 | What was the core? | 5 |
fomc | 2,002 | The core was 2.8, but that was again, as the Chairman is indicating, a reversal of an insurance effect, which had held down prices significantly in the third quarter. | 37 |
fomc | 2,002 | Further questions for David? If not, who would like to start the roundtable? President Moskow. | 21 |
fomc | 2,002 | Thank you, Mr. Chairman. The tone of reports from contacts in the Seventh District has improved significantly since our December meeting. At that time I indicated that most contacts were not seeing signs of a bottom let alone a recovery. Now, reports of stabilizing, bottoming out, or nearing a bottom are more frequent ... | 1,303 |
fomc | 2,002 | President Parry. | 4 |
fomc | 2,002 | Mr. Chairman, employment in the Twelfth District continued to contract in late November and December, as firms in nearly every sector and in most District states shed jobs. Still, signs of a turnaround are beginning to emerge, suggesting that conditions may improve in coming months. Looking back on 2001, it's now appar... | 880 |
fomc | 2,002 | President Minehan. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. The New England economy continued to slow in December, but the pace of its decline moderated. Indeed, the available information from a wide range of contacts with District businesses and the Bank's directors suggest some light at the end of the tunnel. Uncertainty remains high, however, and cau... | 1,886 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. I read the report from the First District as being rather cautious or even downbeat. I must say that the view from St. Louis is a good bit more optimistic. I tried to convince President Minehan to accept a bet yesterday on the Super Bowl. I offered her a case of Budweiser against a case of lobs... | 83 |
fomc | 2,002 | Somehow, even I know the value of the two! | 12 |
fomc | 2,002 | I tried to smoke out her odds, so I suggested a case of Bud against a lobster dinner, and she still wasn't interested. Then I said "How about against a lobster claw?" [Laughter] | 41 |
fomc | 2,002 | I just got over feeling good that our New England team didn't disgrace themselves. [Laughter] | 19 |
fomc | 2,002 | Well, we're a little more optimistic than that in St. Louis. | 14 |
fomc | 2,002 | Ned just realized that this discussion was about football! [Laughter] | 15 |
fomc | 2,002 | I thought you were talking about the economic outlook! | 10 |
fomc | 2,002 | Well, let me comment on some of the reports from our District. Incidentally, Wal-Mart is headquartered in our District and is doing just fine, Mr. Moskow. | 35 |
fomc | 2,002 | We noticed. [Laughter] | 7 |
fomc | 2,002 | I talked to my contact at Wal-Mart on January 18. He said that December sales at Wal-Mart came in substantially better than had been anticipated; sales at comparable stores were up 8.2 percent over the prior year. And at that point in January, sales were running above plan, at better than 6 percent year over year. He i... | 819 |
fomc | 2,002 | President Broaddus. | 5 |
fomc | 2,002 | Mr. Chairman, if we looked at the actual statistics on current economic activity in our District, I think we'd have to say it's still edging lower. Let me cite a couple of examples: Retail sales in particular have weakened most recently, according to a monthly survey we conduct; factory shipments are down in our Distri... | 921 |
fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | Thank you, Mr. Chairman. Last time I reported that economic conditions in the Third District appeared to be stabilizing. This time I can report that conditions in the District are improving somewhat. Retail sales of general merchandise exceeded the pessimistic forecasts for the Christmas season and were about even with... | 1,128 |
fomc | 2,002 | President McTeer. | 5 |
fomc | 2,002 | Mr. Chairman, one advantage that Texas has over many other states is our billboards. We have a lot of high-quality billboards in Texas. [Laughter] I was in San Antonio last week and on the way to the Dallas-Fort Worth airport I saw a huge billboard that said "San Antonio loves God, country, and supports free enterprise... | 1,268 |
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