Recently the Federal Open Market Committee

NationalEconomicTrends Deflation, Corrosive and Otherwise Recently the Federal Open Market Committee (FOMC) mentioned deflation as a possible risk for the U.S. economy. In the statement released after the May policy meeting, the Committee stated that the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level. Later, Chairman Greenspan spoke about more than just a mild deflation. In comments to the International Monetary Conference in early June, Chairman Greenspan referred to the risk of corrosive deflation that essentially feeds on itself, creates falling asset prices, which in turn brings down levels of economic activity What is the main evidence on deflation? Are there corrosive and benign forms? Does economic performance always suffer during periods of sustained deflation? The accompanying table provides some evidence on deflation and lists periods in which the United States or Japan have experienced three or more years of a declining price level. There are three main episodes: the late 19th century in the United States, the Great Depression in the United States, and Japan since 1999. For each deflationary episode, the table lists the average real GDP growth and the average inflation based on two popular inflation measures, the GDP deflator and the consumer price index. The table also lists a benchmark average growth of GDP for years surrounding the deflation experience, so we can consider whether deflation is associated with lower-than-average growth for the corresponding era or not. Generally speaking, the United States experienced rapid growth during the late 19th century, with GDP growth averaging about. percent for the period 17-19, Deflationary Episodes July despite an average deflation of about 1. percent. By itself, this suggests that a mild deflation is not necessarily associated with poor economic performance. However, averaging over a long period of time could mask severe distress that may accompany deflation. To address this issue, we examine the subperiods 17-179 and 1-. During the former, GDP growth actually was greater than the benchmark value, despite a rather hefty. to. percent annual average decline in the price level. Evidently, this deflationary episode was rather benign. In contrast, the deflationary episode of 1- was not so benign. GDP growth fell well below the benchmark average for that time. The same is also true at the onset of the Great Depression (19-19) and the recent episode in Japan (1999-). During the Great Depression, GDP growth averaged a whopping. percent and inflation was around. percent. While not as severe, Japan also experienced slow growth during its deflationary episode. As the table shows, U.S. experience with sustained deflation has been limited since the founding of the Federal Reserve in 191. The results from 19-19 are uniformly bad, but deflation may simply have been a by-product of the economic collapse at that time. Japan s experience is perhaps more relevant for today s circumstances. Although sustained deflation is not everywhere and always corrosive, on balance the evidence suggests that deflationary episodes are marked by subpar growth. James B. Bullard and Charles M. Hokayem GDP CPI Real GDP Real GDP growth Country/period deflator inflation inflation growth (benchmark years) U.S. 17-19.9% 1.7%.%.% (17-191) 17-179.%.9%.%.% (17-191) 1-.7%.% 1.%.% (17-191) U.S. 19-19.%.9%.%.7% (1919-191) Japan 1999-1.%.71%.9%.% (19-) NOTE: GDP deflator and real GDP data: Robert J. Gordon, Macroeconomics, th Ed., Addison-Wesley,. CPI data: Historical Statistics of the United States, Colonial Times to 197, Bicentennial Ed. Part 1, U.S. Bureau of the Census, 197. Views expressed do not necessarily reflect official positions of the Federal Reserve System. Available on the web at research.stlouisfed.org

Contents Page Economy at a Glance Output and Growth 7 Interest Rates Inflation and Prices 1 Labor Markets 1 Consumer Spending 1 Investment Spending 1 Government Revenues, Spending, and Debt 1 International Trade Productivity and Profits Quick Reference Tables 7 Notes and Sources Conventions used in this publication: 1. Except where otherwise noted, solid shading indicates recessions, as determined by the National Bureau of Economic Research. The NBER has not yet determined the end of the recession that began in March 1; however, the hatched shading indicates this recession ended in November 1, as determined by a statistical model for dating business cycle turning points developed by Marcelle Chauvet ( An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching, International Economic Review, November 199, pp. 99-9) and discussed by Marcelle Chauvet and Jeremy Piger ( Identifying Business Cycle Turning Points in Real Time, Federal Reserve Bank of St. Louis Review, March/April, pp. 7-).. refers to simple percent changes. from year refers to the percent change from the same month or quarter during the previous year. Compounded annual of change shows what the growth would be over an entire year if the same simple percent change continued for four quarters or twelve months. The compounded annual of change of x between the previous quarter t 1 and the current quarter t is: [(x t /x t 1 ) 1] 1. For monthly data replace with 1.. All data with significant seasonal patterns are adjusted accordingly, unless labeled NSA. We welcome your comments addressed to: Editor, National Economic Trends P.O. Box St. Louis, MO 1- or to: stlsfred@stls.frb.org National Economic Trends is published monthly by the of the. Single-copy subscriptions are available free of charge by writing to the Public Affairs Department,, P.O. Box, St. Louis, MO 1- or by calling (1) -9. Subscription forms may also be completed online at research.stlouisfed.org/order/pubform.php. For more information on data in this publication, please visit research.stlouisfed.org/fred or call (1) -7. The entire publication is also available on the Internet at research.stlouisfed.org/publications/net.

updated through 7/1/ National Economic Trends Real GDP Growth Compounded annual s of change Consumer Price..... -. - 1 11 197 1 7 171 -. 1 11 197 1 7 171 Industrial Production 1. Interest Rates Percent 1.. 7 1- Treasury. -. 1 -Month Treasury -1. 1 11 197 1 7 171 1 11 197 1 7 171 Change in Nonfarm Payrolls Thousands 1-1 - - - - 1 11 197 1 7 171 Unemployment Rate Percent of labor force....... 1 11 197 1 7 171

National Economic Trends updated through 7/1/ Real Gross Domestic Product from year 1-7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Industrial Production and Institute for Supply Management (ISM) es from year 1 1 Industrial Production 7 - -1-1 ISM 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Aggregate Private Nonfarm Hours from year 1 - - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Real Change in Private Inventories Percent of GDP 1-1 - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1

updated through 7/1/ Real Final Sales and GDP Compounded annual s of change GDP (bar) Final Sales - 1 197 1 7 171 Real GDP Revisions Compounded annual s of change 7 1-1 National Economic Trends Advance Preliminary Final Revision :1 : : : :1 Industrial Production and ISM 1.. Industrial Production (bar) Nominal Gross Domestic Product Compounded annual s of change 1. -. -1. ISM -1. 1 197 1 7 171 1 197 1 7 171 Aggregate Private Nonfarm Hours.7 Average Weekly Private Nonfarm Hours Hours.... -. -. -.7...7. -1. 1 197 1 7 171. 1 197 1 7 171 Real Change in Private Inventories Billions of 199 dollars - - -9-1 1 197 1 7 171 Inventory-Sales Ratio Manufacturing and trade 1. 1. 1. 1. 1. 1. 1. 1. 1. 1 197 1 7 171

National Economic Trends updated through // Contribution of Components to Real GDP Growth Percentage points at compounded annual s - - - 1Q 1Q 1Q Q1 Q Q Q Q1 Consumption Exports Government Imports Inventories Investment Contributions to Real GDP Growth Rate 1 nd rd th 1st nd rd th 1st Final Sales -. -..1. -.. 1.1. Change in Inventory -1.1 -.9-1.9. 1.1.. -. Consumption.9.97.. 1..9 1.19 1. Fixed Investment -1.9 -.7-1.9 -.7 -. -.. -. Nonresidential -1.9 -.7-1. -. -.7 -.. -.7 Residential -.. -.1..1..1. Government 1. -.1 1. 1..7... Federal..7..7.7.9.7. State and Local. -. 1.. -.1.7.. Net Exports -. -. -. -.7-1. -.1-1.9.7 Exports -1. -1.9 -.99. 1.9. -.9 -.1 Imports 1. 1.7.7-1. -.9 -.7-1..91 Residual..7. -..7... Real GDP Growth -1.9 -.9.7. 1.. 1. 1.

updated through 7// National Economic Trends Interest Rates Percent 1 1 9 1- Treasury -Month Treasury 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Treasury Yield Curve Percent....7.. Jun Week Ending: 7// 1..7 Jun m. 1y y y 7y 1y Standard and Poor s with Reinvested Dividends from year 7 - - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7

National Economic Trends updated through 7/1/ NIPA Chain Price es from year 1 1 GDP Gross Domestic Purchases 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Consumer Price from year 1 9 Excl. Food and Energy All Items 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Producer Price, Finished Goods from year 1 - Excl. Food and Energy 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 PPI Employment Cost and Compensation per Hour from year 1 9 Comp. per Hour 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 ECI

updated through 7/1/ NIPA Chain Price es Compounded annual s of change National Economic Trends Oil & Natural Gas Prices: Spot & Futures Dollars per barrel Dollars per million btu 1 GDP (bar) Gross Domestic Purchases Spot Oil Oil Futures 1 1 1 1-1 1 197 1 7 171 Consumer Price Compounded annual s of change 1 1 1 Spot Gas Gas Futures 1999 1 1999 1 Note: Futures prices as of //. Consumption Chain Price Compounded annual s of change Excl. Food & Energy 1 PCE (bar) - - CPI (bar) - Excl. Food & Energy - 1 197 1 7 171-1 1 197 1 7 171 Producer Price, Finished Goods Compounded annual s of change. Unit Labor Cost Compounded annual s of change 1. 7. PPI (bar) Manufacturing (bar). -7. -. Excl. Food & Energy - Nonfarm -. 1 197 1 7 171-1 1 197 1 7 171 Employment Cost from year Compensation per Hour Compounded annual s of change Benefits Compensation Wages and Salaries 199 1999 1 1 11 197 1 7 171 1 197 1 7 171 9

National Economic Trends updated through 7// Employment from year Payroll Survey Household Survey - - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 See the Notes section at the end of this publication for the Feb. 7,, revisions to the Household Survey, and the June,, revisions to the Establishment Survey. Unemployment, Labor Force Participation, and Employment Rates Percent of labor force 1 9 Labor Force/Population Employment/Population Percent of population 7 7 1 Unemployment Rate 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Duration of Unemployment Percent of labor force. Weeks 1.7. Unemployed < Weeks 1 1. 1..7 Unemployed > Weeks Median 1. 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 1

updated through 7// National Economic Trends Change in Nonfarm Payrolls Thousands Change in Manufacturing Payrolls Thousands 1 1-1 - - - -1 - - 1 197 1 7 171-1 197 1 7 171 Change in Household Employment Thousands 1 Labor Force and Population from year. 97. - 9% Confidence 1. 1.. Labor Force Pop. -. -97 1 197 1 7 171 -. 199 1999 1 1 11 197 1 7 171 Available Labor Supply and Components Percent of labor force 11 1 9 Available Labor Supply 7 Unemployed Want to Work 199 1999 1 1 11 197 1 7 171 Unemployment Rate & Help-Wanted Percent. 7. 7........... 1. Help-Wanted Unemployment Rate 199 1999 1 1 11 197 1 7 171 9% Confidence 9 9 7 7 11

National Economic Trends updated through 7// Real Disposable Personal Income from year, quarterly data 1-7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Real Consumption from year, quarterly data 1 from year, quarterly data Durables 1 Total - - -1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 - Retail and Food Services Sales from year, quarterly average 1 1-7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 *Data before January 199 are not strictly comparable (see End Notes). Debt Service Payments and Household Debt Outstanding from year, quarterly data 1 Debt Service Payments Percent of disposable personal income 1 1 1 9 1 Household Debt Outstanding 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 11 1 1

updated through 7// Real Disposable Personal Income Personal Saving Rate Percent National Economic Trends 1-1 - - 1 197 1 7 171 199 1999 1 1 11 197 1 7 171 Real Consumption Compounded annual s of change Real Consumption. 1... -. 1 197 1 7 171-1. 1 197 1 7 171 Retail & Food Services Real Durables Consumption & Vehicle Sales Millions of vehicles, annual Ex. Autos 1 9 Durables (bar) 1 19 1 - Total (bar) - 1 197 1 7 171-1 - Autos and Light Trucks -9 1 197 1 1 7 171 17 Consumer Sentiment (U. of Michigan) 1 11 1 9 7 199 1999 1 1 11 197 1 7 171 Real Durables Consumption Compounded annual s of change 1-1 - 1 197 1 7 171 1

National Economic Trends updated through // Investment Percent of nominal GDP Total 1 1 1 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Private Private Fixed Investment from year 1 1 Nominal Real - -1-1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Real Nonresidential Fixed and Equipment & Software Investment from year 1 - -1 Equipment & Software Nonresidential - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Real Residential Fixed Investment from year - - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 1

updated through 7// National Economic Trends Gross Saving Rates and Net Foreign Investment Percent of GDP 1 Overall Saving Percent of GDP 1 1 1 1 1 Private Saving NFI 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 - - - Real Private Fixed Investment Compounded annual s of change Nondefense Capital Goods Orders from year, excluding aircraft - - 1-1 Orders Equipment & Software Investment -9 - -1 1 197 1 7 171-199 1999 1 1 11 197 1 7 171 Real Equipment & Software Investment Compounded annual s of change 1 - -1 - - 1 197 1 7 171 Real Nonresidential Fixed Investment Compounded annual s of change - -1-1 197 1 7 171 Real Residential Fixed Investment Compounded annual s of change 1-1 197 1 7 171 Housing Starts and New Home Sales Millions, annual....1. 1.9 1. 1.7 1. New Home Sales Millions, annual 1. Housing Starts. 1.. 1..7 197 1 1 7 171 1. 1.1 1.1 1. 1. 1..9.9.

National Economic Trends updated through // Govt. Consumption and Investment Billions of 199 dollars 1 1 Total 1 Government Receipts and Outlays Percent of GDP Total Outlays 1 1 State & Local Total Receipts Fed. Outlays Federal Fed. Receipts 7 9 9 9 9 9 7 9 9 9 9 9 Government Budgets Billions of dollars National Income Accounts Calendar s Unified Budget Fiscal s Receipts State and Local Federal Federal Expenditures Surplus or Deficit (-) Receipts Expenditures Surplus or Deficit (-) Receipts Outlays Surplus or Deficit (-) 1991 71. 7. -7. 17. 17. -.. 1. -9. 199 77. 777. -. 111. 11.9-97. 191. 11.7-9. 199. 1.7 1. 1197. 171. -7. 1. 19. -.1 199 7... 19.7. -1.. 11.9 -. 199 917.9 9.. 1.7 7.7-19. 11.. -1. 199 9. 99. 1. 199.1 1.9-1..1. -17. 1997 111. 9. 1.. 17. -. 79. 11. -. 199 17. 1.7.7 179.7 17.9. 171.. 9. 1999 11.1 1.. 17. 17. 111.9 17. 171.9. 11. 119. 1..9 17.1.. 17.. 1 11. 19. -1.. 19. 7. 1991. 1.9 17.1 1. 1. -1.9 17. 7. -.. 11. -7. Q 1.7 11...9.7 197... 11. Q. 1. 19. 9.1 1.9 1. 91.7 1.. Q 1. 11. -..1 1. 19... -. 1Q1 17. 1. -1. 7.9 199.1 17. 9.. -. 1Q 11.1 19. -. 7. 197. 1... 19.7 1Q. 199. -. 19. 197.7-1.7 9..7-1.7 1Q 1. 11. -.1 199. 1971. 1.. 1.7 -. Q1 17. 19.1 -. 1.7. -. 1. 9. -9. Q 1. 17. -.1 1.7 79. -19...9. Q 11. 1. -.7 1.1 7. -1. 1.7 9. -1. Q 11. 1. -. 1. 117. -. 7..1-1.7 Q1 1. 11.9 -.9 19..1-7. 97. 1.7-1.9 1

updated through // National Economic Trends Federal Debt Percent of GDP 7 Total Federal Surplus (+) / Deficit (-) Percent of GDP - NIPA Held by Public - - Unified Budget - 7 9 9 9 9 9 7 9 9 9 9 9 Change in Federal Debt Percent of GDP Federal Surplus (+) / Deficit (-), Unified Basis Billions of dollars, fiscal years 7 Total Excl. interest payments - Held by Public - Total - - 7 9 9 9 9 9 Federal Government Debt Billions of dollars, end of month or fiscal year Excludes Agency-issued debt Total Public Debt Held by Agencies and Trusts 7 9 9 9 9 9 Held by Public Federal Reserve Banks Held by Private Investors Foreign and Total International 7..7. 11. 9. 7.9 1 7...7.1 779.7.. 7.7.. 9. 117.1 March 77... 1.7 1. 11.9 June.9 19. 9.7. 97. 1. September 7..7. 11. 9. 7.9 December..7 7. 11.7. 1. 1 March 77.7 9...9 9. 19.9 June 7.. 7..1 7. 1. September 7...7.1 779.7. December 9. 9.7 9. 1.7 19. 1. March...7 7. 9. 17. June 1..9. 9.7 9. 111.9 September. 7.7.. 9. 117.1 December.7 7. 7. 9. 1. 11.7 March. 7. 71. 1... Total 17

National Economic Trends updated through 7// Current Account, Trade and Investment Income Balances Billions of dollars, quarterly 1-1 - - - - - -7 - -9-1 -11-1 -1 Investment Income Current Account Goods and Services Percent of GDP 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 1-1 - - - - - -7 - -9-1 -11-1 -1 Exchange Rates, March 197 = 1 1 Yen/US$ 1 x (Ecu or Euro/US$) 7 1 1 1 Yen Major Currency Ecu Euro 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 Goods Export Shares, UK.7% Mexico 1.9% Goods Import Shares, UK.% Mexico 11.% China 1.7% All Other.% China.% Japan 7.% All Other.% Japan 1.% France.79% Germany.91% Germany.7% Other OECD 17.% Canada.% France.% Other OECD 1.99% Canada 17.9% 1

updated through 7// Trade Balance Billions of dollars - -1 - - - - - - Goods and Services - Goods - 1 197 1 7 171 Goods Trade National Economic Trends from year Imports 1 - -1 Exports - - 1 197 1 7 171 Current Account Balance Billions of dollars - - - - -1-1 Services Trade from year 1 - -1 Exports - Imports -1 1 197 1 7 171-1 197 1 7 171 Real GDP Growth of Major Trading Partners Compounded annual s of change United Kingdom Germany - 1 1-1 1 Canada France - 1 1-1 1 1 Japan Mexico 1-1 - 1 1-1 1 19

National Economic Trends updated through 7/1/ Output per Hour and Capacity Utilization, Manufacturing from year 1 Utilization Rate (level) Percent 9 7 Output/Hour - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Nonfarm Compensation per Hour from year 1 Nominal Real - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Output per Hour, Nonfarm Business and Nonfarm, Nonfinancial Corporations from year 9 Nonfarm Business Sector Nonfinancial Corporations - 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1

updated through // National Economic Trends Nonfarm Output per Hour Compounded annual s of change 1 Manufacturing Output per Hour Compounded annual s of change 1 - - - 1 1 197 1 7 171 197 1 7 171 Selected Component Shares of National Income Percent 1 Corpo Profits Percent 77 7 11 9 7 Compensation Proprietors Income 7 71 9 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 Corpo Profits Percent of GDP 1 1 Book Profits (Before Tax) Economic Profits (After Tax) 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 7 79 1 7 9 9 91 9 9 9 9 9 97 9 99 1 Note: Economic Profits include IVA and CCAdj; Book Profits exclude them (see Notes). 1

National Economic Trends updated through // Billions of $ Nominal GDP Billions of 199 $ Real GDP Billions of 199 $ Final Sales Change in Private Inventories Billions of 199 $ Last qtr / 1999. 97....9..1 79.99....7. 9...9 9191.1.. 911.1..7..97 1. 1... 91... 9.99. 1.. -1.7. 1... 99.7.. 9.7. 1...1 1 99..7.1 997.1.. 9...... 9.7 7. 7.1 9.711..9 9111.11.1. 91.9 9.1. 97... 91.1..7 9.7 1.7..1 7.1. 99... 9. 1.1. 9179.79 1.. 9.9.97 1 1 1.1..9 99.9 -. 1. 9.77.. -.91.91. 19..9. 919. -1. -.1 9.9 -. 1. -.97 9.. 197. 1.9. 91.1 -. -. 9. -..9-1.77-1.7. 1.9.. 9.7.7.1 9.9. 1. -9.1-1.7 1 11.1.. 9.. 1. 979.. 1. -.97-1.. 17.9.. 99. 1.. 977.71 -.1 1..91 -....1. 9.79.. 97.11.. 1. -.9.... 91. 1..9 9.99 1.1 1.7..1 1 1... 91.991 1.. 9.11. 1.7.71 1.7 Billions of 199 $ Consumption Durables Consumption Billions of 199 $ Private Fixed Investment Billions of 199 $ Nonresidential Fixed Investment Billions of 199 $ 1999. 9...9 1.9. 11. 9.. 7. 1.9..1..9.. 7.9.. 191.9..1 1.199. 7. 1. 77.1.. 91... 17.1. -..1. -.. 7.7..1 999.. 7. 77.7. -.1 11.77. -.7 1 1...1 79. 17. 1.1 17.17 1. 7. 197.1... 19.1.. 71. -.7. 17.9.7 7.1 19. 1..9..1....1 7. 171.7..7 1.77. 7....1. 7.79 -.. 191.7 -.. 19.99 -.. 1 1... 9.9 11.. 1.7 -.. 111. -. 1.1.. 1.. 91...7 1. -11.1 -. 1.97-1. -.1. 7.9 1. 1. 9.1.. 1. -. -.1 11.71 -. -7...9.. 991.9. 1. 7. -.9 -.7 1.9-1.9-9. 1 1..1. 97.9 -.. 7. -. -. 11.1 -. -9... 1..1 9.. 7. 7. -1. -.7 111.99 -. -.. 9.1.. 1.. 11.9 71.9 -. -.7 117. -. -.1. 7.91 1.7.7 11. -. 1.9... 1.. -1.7 1 7.9... -.. 7.9 -.1.7 117. -. -1.

updated through // National Economic Trends GDP Chain Price Employment Cost ECI: Wages ECI: Benefits 1999. 1.9. 1. 1... 1... 17.... 1.9..1 1.9.. 1...1...7 1. 19......1 1...7 1.7..9. 11.. 1.1 1.9..... 171.7..9 1 1..1 1.9 1... 1.9...... 1.9..1 1......1.1.1.7. 17.1 1.7. 19.7.1.7 1.7..1 7...9. 17..1. 1.1.. 17.9..9.7..7 1 1 1..7.... 19..1. 1.... 19.....7....7 1.... 19.9...7.9.... 1.7..9. 19.7 -.. 7.....7.7 1...1 1 11.1 1. 1....9..7. 1...9. 11. 1. 1.1 1...1..7. 17...1. 11.7 1.. 11...7.9 1.. 17.... 111. 1. 1. 1.7.. 7.7.1. 17.7..7 1 111.9. 1. 1.9.. 9..1.9 17.9 1..1 Exports Imports Nonfarm Output per Hour Nonfarm Compensation per Hour Billions of 199 $ Billions of 199 $ 1999. 1.9.. 1.1. 1.9 11.9.. 1.... 117.199. 9.7.9. 1. 11...9 1.. 7. 1. 17.11. -. 19.1. -.9 117.. 1.1 1...7... -1. 7.7..7 1.1.. 19... 1 19.71 7.7. 1.19 1.7 1. 11.7.. 1.... 11.77 1. 11.. 1. 1. 11..1. 11.... 1.9 11. 11. 7. 1. 1.1 11..7. 1.. 7.9. 1. -. 7. 7. -1. 11.1 117.1 1.7.1 1.. 7.1 1 1 11.9 -..7.11-7.9. 11.7-1. 1.7 1.... 19. -1. -.1 1.9 -. -1. 11. -.. 1...7. 1.17-17. -1.1 1.9-11. -7.1 117..1. 1.7 1. 1.. 11.7-9. -11. 17. -. -. 119. 7. 1.9 17. 1. 1. 1 1.. -9. 177.1. -.1 11... 1.1. 1... 1. -..919.. 1. 1.7.9 19..1.. 177.9.....7 1.9..7 1.1 1.7.. 11. -..9 9.7 7. 1.1 1. 1..1 11..1.1 1.9-1..7.77 -.. 1. 1.9. 1.7..

National Economic Trends updated through 7// Household Survey Employment Thousands Change Nonfarm Payroll Employment Thousands Change Nonfarm Aggregate Hours Monthly 199. 117 19. 1. 9 7.. 99.... 1999. 19. 1. 199 7.. 11....1. 199 1.. 1179 79.. 1... 1.9 1. 191.. 11.. 1.1.. -1.. 1 -. -. 17 -. -1.1 1... -. 1 1 177 1.. 1 199. 1.1 1. -. -... 17 - -1.9.1 11-7 -1.. 1. -. -. -.9. 177-79 -1.1. 1171 - -1. -. 11. -. -.1-1.7. 11 - -1. -. 19-79 -. -1.1 1. -1. -. -.9 1 11-9 -. -1. 1-97 -1. -1. 1. -.1 -. -.9. 1 7.7 -. 1-1 -. -1. 1. -.1 -. -.. 1 9 1..1 19-1 -. -1.1 99. -. -1. -1.9. 1-1 -.. 1 99. -. 99. -. -1.1-1. 1 171 77. 1. 1-11 -. -. 99.1 -. -1.7-1.. 177 7..9 1 - -.7 -. 9.7 -. -1. -1. 1 Jun 19-17 -1. -.1 1-1 -1..1 1. -. -. -1.1. Jul 17 17 1.. 117-197 -1. -.1 1. -.1-1. -1.. Aug 1-7 -. -. 11719-1 -1. -. 11. -. -.7-1.. Sep 1. -. 1-19 -1. -. 11. -. -. -.. Oct 17 - -. -. 1119 - -. -.7 1. -. -.9 -.. Nov 11 - -1. -. 19-9 -.7-1.1 1. -.1-1. -.1. Dec 17-1 -1. -1.1 11-9 -. -1. 1..1 1. -. Jan 1791-7 -. -1. 17 - -. -1. 1. -. -. -.. Feb 1 9. -.9 11 - -. -1. 1... -.7. Mar 11-7 -.7-1. 11-9 -. -1. 1... -.. Apr 119. -. 1 - -. -1. 1. -. -. -.. May 17 91. -. 111 - -. -1. 1. -.1-1. -.. Jun 1-1 -.9 -. 1 - -. -1. 1... -.. Jul 1 - -. -. 1-179 -1. -1. 99.7 -.7 -.1 -.. Aug 177 1.7. 1. -1.1 99.9.. -1.9. Sep 171.. 19. -1. 99.9.. -1.. Oct 19 - -.. 1 119 1.1 -. 99.7 -. -. -.9. Nov 1 - -.. 19 1. -. 99. -.1-1. -.9. Dec 19-1 -.9. 119-11 -1.9 -. 99. -. -. -1. Jan 17 197 1.1 1. 1 1. -. 99... -.9. Feb 17-1 -1.1.7 1-11 -1.1 -. 99. -. -.7-1.. Mar 17 - -..9 1-1 -1. -. 99... -1.. Apr 177 9. 1.1 1 - -. -. 9. -. -. -1.. May 177 - -1.7.7 1999-7 -. -. 9.7 -.1-1. -1.. Jun 177 1. 1. 199 - -. -. 9.7.. -1.7

updated through 7/1/ National Economic Trends Unempl. Rate Retail and Food Services Sales Billions of dollars Monthly/ quarterly Industrial Production Monthly/ quarterly Treasury Yields (Percent) -mo 1-yr 199.. 91....9.....7. 1999.. 11.9... 11.11....... 7....7 1....7.. 1.. 71.7...9 111.9.. -..9....17... 11.1.. -. 1..1 1 1..7... 11.1-1. -.1 -......7...1 111.7-1. -.1 -...7... -. -.7 1.7 11. -1. -. -..17.9.. 9..1 1.. 1.9-1. -. -.7 1.91.77 1. 79. -1. -.1.7 19.. 1. -. 1.7... 9.1 1.1.. 11.9 1.1. -1. 1.7.1.. 9. 1. 7..1 111.7... 1....9 9.91.1.. 11. -.9 -. 1. 1..1 1. 919. 1... 11.9.1. 1.1 1.1.9.. 97.9.9.. 19.9 -. -. -. 1.. 1 Jun. 7.79 -. -.. 111. -. -7. -..9.. Jul..1.1 1.. 11.99 -.1-1. -..1.. Aug.9 9....1 11.9 -. -. -...97. Sep.. -1.7-1.9 -. 19.9 -.7 -. -...7. Oct. 1.99.1 1.. 19.1 -. -. -..1.7. Nov. 9.71 -.7 -.. 1. -. -7.1 -. 1.7.. Dec. 9.9 -.1-1.. 1.7 -. -. -.9 1.9.9 Jan. 9.9 -. -.7.1 1.97. 7. -. 1... Feb. 9.7...7 19.197.. -.9 1.7.91. Mar.7 9.79 -.1-1.. 19.1.. -. 1.79.. Apr.9 97.7 1. 1.. 11.11.. -. 1.7.1. May. 9.7-1. -1. 1.7 11.7..7-1. 1.7.1. Jun. 97.1 1. 17.. 11.1..1 -. 1.7.9. Jul.. 1. 19.9.9 111.77.7.. 1... Aug..9. 7.9.1 111. -. -.9. 1... Sep.7 99.1-1.7-1.. 111. -.1 -.7 1. 1..7. Oct. 99..1 1. -. 11. -. -.9 1. 1..9. Nov.9 1.77. 9..7 11.797.. 1. 1... Dec..1 1. 17.. 19.9 -. -9. 1. 1.19. Jan.7 7...9. 11.7.7.9 1. 1.17.. Feb..71-1. -.. 11.7.1.7 1. 1.17.9. Mar. 9.7..7. 11. -. -.9. 1.1.1. Apr..7 -. -.. 19.1 -. -.9 -. 1.1.9. May.1.1...1 19..1.7 -. 1.7.7. Jun. 1.17... 19.7.1 1. -1..9.

National Economic Trends updated through 7/1/ Consumer Price Monthly/ quarterly to date Consumer Price less Food and Energy Monthly/ quarterly to date Producer Price Finished Goods Monthly/ quarterly 199. 1... 1.. 17..... 1.7.. -.9 1999. 1..... 177....1. 1... 1.. 17..... 11..... 1....7 1. 177.1.... 1.1...7. 1.7.... 179.9.. 1.. 19..... 1.9.. -1. 1 1 17.9.9... 1..7.9.7.9 11.7 1.... 177.......... 1..... 177.7. 1..7.7 1.7.7.7.7.7 1.7 -.9 -. 1.. 177. -. -. 1. 1. 1..7.7.7.7 1. -1.7 -. -1.1 1 17.. 1. 1. 1. 19...1..1 1. -. -.1 -.. 179..9. 1.. 19...1..1 1.7. 1. -.. 1... 1.. 191..... 1.7.. -1.. 11..... 191.. 1..1.1 19.7.7. 1. 1 1.1 1..9.9.9 19.. 1. 1. 1. 1.. 9.9.. 1..1... 19... 1. 1. 1. -. -.1. 1 Jun 177.9.... 1....7. 11.7 -. -.9.. Jul 177. -. -.7..9 1....7.9 1. -1.1-1. 1.. Aug 177..... 1.7. 1.9.. 1.7.... Sep 17.1..1..7 17.1.... 11... 1.. Oct 177. -. -..1.1 17.. 1.9..7 19.1-1. -17. -.. Nov 177. -.1-1. 1. 1. 1.1...7.9 1. -. -.7-1.. Dec 177. -.1 -.7 1. 1. 1.. 1.9.. 17.7 -. -.1-1.7 Jan 177... 1.1. 1.7. 1.9. 1.9 17.7.. -.. Feb 177.9.. 1.1. 19.. 1.9. 1.9 1.1.. -.7. Mar 17...1 1..7 19..1 1.. 1.7 19.. 1. -1.. Apr 179... 1.. 19.7....1 19. -.1-1.7 -.1. May 179..1 1. 1.. 19.. 1.9..1 1. -. -.1 -.7. Jun 179... 1.1. 19..1 1.. 1.9 1..1 1.7 -.. Jul 1.1.. 1..7 19.. 1.9. 1.9 1... -1.1. Aug 1...7 1.7.7 191.1.... 1... -1.. Sep 1.9..7 1..7 191.. 1.9..1 19... -1.. Oct 11..... 191..1 1... 1.1. 9.9.7. Nov 11..1 1... 191..1 1... 19.7 -. -. 1.. Dec 11..1 1... 19.1. 1.9.. 19. -. -. 1. Jan 1..... 19..1 1. 1.9 1. 11. 1. 17.7.. Feb 1.. 7...7 19..1 1. 1.9 1. 1. 1.1 1... Mar 1.9.... 19... 1.7..1 1. 1.1.. Apr 1. -. -... 19... 1.. 1. -1.9 -.9.. May 1....1. 19... 1. 1.1 11.9 -. -... Jun 1....1. 19... 1..9 1...1.9

National Economic Trends Notes Pages, : Final Sales is gross domestic product (GDP) minus change in private inventories. Advance, Preliminary, and Final GDP Growth Rates are released during the first, second, and third months of the following quarter. Changes result from incorporation of more complete information. Real GDP is measured in 199 dollars. The ISM (formerly Purchasing Managers ) is a weighted average of diffusion indexes for new orders, production, supplier deliveries, inventories, and employment. Aggregate and Average Weekly Hours are paid hours of production and nonsupervisory employees. The Inventory-Sales Ratio uses nominal (current-dollar) inventory and sales data. Page : For information on how to calculate the Contribution of a component to the overall GDP growth, see the October 1999 issue of the Survey of Current Business, p. 1. The sign is changed for Imports. Page 7: Ten-year Treasury Yields are adjusted to constant maturity; threemonth yields are secondary market averages. All s used in the yield curves are adjusted to constant maturity. The -year constant maturity series was discontinued by the Treasury Department as of Feb. 1,. Standard and Poor s with Reinvested Dividends shows the total return: capital gains plus dividends. Pages, 9: Oil (West Texas intermediate) and Natural Gas (Henry Hub) spot and futures prices are listed in the Wall Street Journal. Spot prices are monthly averages of daily prices; futures prices are usually taken from the last trading day of the month. Consumer Price is for all urban consumers. The Consumption Chain Price is the index associated with the personal consumption expenditures component of GDP. The Employment Cost (ECI) covers private nonfarm employers. ECI Compensation refers to a fixed sample of jobs, while Compensation per Hour covers all workers in the nonfarm business sector in a given quarter. In both cases, compensation is wages and salaries plus benefits. Pages 1, 11: Effective with the May Employment Situation, the establishment survey data for employment, hours, and earnings have been converted from the 197 SIC system to the NAICS system. All published NAICS-based labor series have been revised back to at least 199. For more information see http://www.bls.gov/ces/. Nonfarm Payroll Employment is counted in a survey of about, establishments (Current Employment Survey). It excludes self-employed individuals and workers in private households, but double-counts individuals with more than one job. The Household Survey (Current Population Survey) of about, households provides estimates of civilian employment, unemployment, labor force participation, and employment-population ratio. Population is civilian, noninstitutional, 1 years and over. The 9 percent confidence intervals for the unemployment (±. percentage points) and change in household survey employment (± 9,) measure uncertainty due to sample size. Because the household survey was changed in January 199, data prior to this date are not strictly comparable. The Bureau of Labor Statistics announced several revisions to the Household Survey on Feb. 7,, with the release of the January data. For more information, see <www.bls.gov/cps/>. Page 1: The Michigan Consumer Sentiment shows changes in a summary measure of consumers answers to five questions about their current and expected financial situation, expectations about future economic conditions, and attitudes about making large purchases. The survey is based on a representative sample of U.S. households. Pages 1, : Overall Gross Saving includes government saving, which is the sum of the government surplus and capital consumption (see notes for pp. 1-17). Net Foreign Investment (NFI) is U.S. investment abroad minus foreign investment in the U.S. Aside from a statistical discrepancy, NFI also equals the difference between gross domestic investment and saving. The comprehensive revision introduced the Equipment & Software component of business investment. Pages 1, 17: Government Consumption and Investment is current expenditures on goods and services, including capital consumption (depreciation) and gross investment, as reported in the NIPAs. The Unified Federal Budget Surplus/Deficit differs from NIPA Basis in four main ways: (1) NIPA excludes transactions involving existing assets; () NIPA outlays exclude government investment and include consumption of government capital, while unified budget outlays do the reverse; () NIPA accounts exclude Puerto Rico and U.S. territories; and () various timing issues are handled differently. Outlays and Receipts are from the NIPAs, except as noted. Since 1977, the federal Fiscal starts on October 1. Excluded agency debt was. percent of federal debt at the end of fiscal 1997. Federal Debt Held by the Public includes holdings of the Federal Reserve System and excludes holdings of the social security and other federal trust funds. Federal grants in aid to state and local governments appear in both state and local receipts and federal outlays. Pages 1, 19: The Trade Balance (shown on a balance of payments basis) is the difference between exports and imports of goods (merchandise) and services. It is nearly identical in concept to the Net Exports component of GDP, but differs slightly in accounting details. The Investment Income Balance equals income received from U.S.-owned assets in other countries minus income paid on foreign-owned assets in the U.S. The investment income balance is nearly identical in concept to the difference between gross national product and gross domestic product, but differs in accounting details. The Current Account Balance is the trade balance plus the balance on investment income plus net unilateral transfers to the U.S. from other countries. Pages, 1: Output per Hour (Y/H), Unit Labor Cost (C/Y), and Compensation per Hour (C/H) are indexes which approximately obey the following relationship: %(Y/H) + %(C/Y) = %(C/H) with %() meaning percent changes. Unit labor cost is shown on page 9. Real Compensation per Hour uses the CPI to adjust for the effects of inflation. Nonfarm business accounted for about 7 percent of the value of GDP in 199, while nonfinancial corporations accounted for about percent. Inventory Valuation Adjustments (IVA) remove the effect of changes in the value of existing inventories from corpo profits and proprietors income. (This change in value does not correspond to current production and therefore is not part of GDP). Capital Consumption Adjustments (CCAdj) increase profits and proprietors income by the difference between estimates of economic depreciation and depreciation allowed by the tax code. Components of national income not shown are rental income of persons and net interest. NOTE: Several measures of economic activity are now based on the North American Industry Classification System (NAICS), which replaces the 197 Standard Industry Classification (SIC) system. These include establishment survey data for employment, earnings, and hours; retail sales; manufacturers orders, shipments, and inventories, and the business inventory-to-sales ratio. Sources Bureau of Economic Analysis (BEA), U.S. Dept. of Commerce National income and product accounts, international trade and investment data (except by country), auto and light truck sales. Census Bureau, U.S. Dept. of Commerce Inventory-sales ratios, retail sales, capital goods orders, housing starts, exports and imports by country. Bureau of Labor Statistics (BLS), U.S. Dept. of Labor All employment-related data, employment cost index, consumer and producer price indexes, unit labor cost, output per hour, compensation per hour, multifactor productivity. United States Department of Treasury Unified budget receipts, outlays, deficit, debt. Federal Reserve Board of industrial production, treasury yields, exchange s, capacity utilization, household debt. The Survey Research Center, The University of Michigan Consumer sentiment index. The Conference Board Help-wanted advertising index. Organization for Economic Cooperation and Development (OECD) GDP for major trading partners (not available on FRED). 7