CURRENT BUSINESS CYCLE CONDITIONS (in January 1997). This page will be updated in January1998.

1. GROWTH AND PRODUCTION

A. GDP GROWTH (ANNUALIZED QUARTERLY GROWTH RATE). Q1-1996: 2.0%; Q2: 4.7%; Q3: 2.1%; Q4-1996: +4.7% (RELEASED 1/31).

COMPONENTS OF Q4 GDP GROWTH:

CONSUMPTION: +3.4%

RESIDENTIAL: -1.3%

NON-RESIDENTIAL: +4.2% OF WHICH: EQUIPMENT -1.7% AND BUSINESS CONSTRUCTION +22.5%

INVENTORIES: +$31.9BILLION IN Q4.

GOVERNMENT SPENDING: -1.8%

EXPORTS: +25%

IMPORTS: +4.7%

B. INDUSTRIAL PRODUCTION. NOV: +0.8%; . DEC: +0.8% (9.6% ANNUALIZED RATE) (RELEASED 1/17).

C. MANUFACTURING PRODUCTION. DEC: +1.1% (13.2% ANNUALIZED RATE). YEAR-ON-YEAR GROWTH RATE IN DEC: +5.6%.

D. CAPACITY UTILIZATION. NOV: 83.4%; DEC: 83.8% (RELEASED 1/16).

E. INDEX OF LEADING INDICATORS. OCT: 0.0%; NOV: +0.2%; DEC: +0.1% (RELEASED 2/4)

F. NAPM (NATIONAL ASSOCIATION OF PURCHASING MANAGERS) COMPOSITE INDEX: NOV:52.4%; DEC: 53.8%; JAN: 52% (RELEASED 2/3)

COMPONENTS OF NAPM INDEX:

1. PRODUCTION INDEX. DEC: 58.5%; JAN: 58.1%

2. INDEX OF SUPPLIER DELIVERIES. DEC: 51.6%; JAN: 48.5% (LOWER INDEX IMPLIES FASTER DELIVERIES)

3. NEW ORDERS. DEC: 58.2%; JAN: 53.5%

4. INVENTORIES. DEC: 44.9%; JAN: 44.4%

5. EMPLOYMENT. DEC: 47.5%; JAN: 48.7%

PRICES. DEC: 50.8%; JAN: 51.4%

G. CHICAGO PURCHASING MANAGERS' INDEX. DEC: 57.1; JAN: 55.9 (RELEASED 1/31)

2. LABOR MARKET CONDITIONS

A. UNEMPLOYMENT RATE. DEC: 5.3%; JAN: ... (TO BE RELEASED ON 2/7)

B. EMPLOYMENT: NOV: +127,000; DEC: +262,000; JAN: ... (TO BE RELEASED ON 2/7).

C. NUMBER OF WORKERS CLAIMING FIRST-TIME JOBLESS (UNEMPLOYMENT) BENEFITS. In the week ended Jan. 25 advanced to 351,000 from 341,000 in the week earlier. The more relevant four-week moving average (which helps to smooth out weekly fluctuations in the data) fell to 344,750 from 350,250. (RELEASED 1/30)

D. TOTAL UNEMPLOYMENT BENEFITS ROLLS. 2.45 million in the week ended Jan. 11; 2.45 million in the week ended Jan. 18 (RELEASED 1/30).

D. HELP WANTED INDEX. NOV: 87; DEC: 85 (RELEASED 1/30)

3. PRICE INFLATION

A. CPI (CONSUMER PRICE INDEX) INFLATION. DEC: +0.3% (3.6% ANNUALIZED RATE). YEAR-ON-YEAR (DEC'96 ON DEC'95): 3.3%. (RELEASED 1/14).

B. CORE INFLATION (EXCLUDING HIGHLY VOLATILE ENERGY AND FOOD PRICES). DEC: +0.1% (1.2% ANNUALIZED RATE). YEAR-ON-YEAR CORE INFLATION: 2.6%. (RELEASED 1/14)

C. PPI (PRODUCER PRICE INDEX) INFLATION. 0.6% PPI INFLATION IN 1996 (DECEMBER '96 ON DECEMBER '95) COMPARED TO A 2.6% PPI INFLATION IN 1995.

D. GROWTH OF THE (CHAINED) GDP DEFLATOR. Q2: 1.8%; Q3: 1.7%; Q4: +1.4% (RELEASED 1/31).

4. WAGE INFLATION:

A. AVERAGE HOURLY EARNINGS. DEC: +0.5% (6% ANNUALIZED RATE); 3.8% YEAR ON YEAR. JAN:... (TO BE RELEASED ON 2/7

B. EMPLOYER COST INDEX (ECI). Q3: +0.6%; Q4: +0.8; 2.9% FOR THE YEAR (RELEASED 1/28).

5. CONSUMER SPENDING AND INCOME

A. CONSUMPTION AND INCOME.

CONSUMER SPENDING. OCT: 0.7%; NOV: 0.5%; DEC: +0.5% (RELEASED 2/3)

PERSONAL INCOME: OCT: 0.0%; NOV: 0.5%; DEC: +0.8% (RELEASED 2/3)

B. RETAIL SALES. OCT: +0.7%; NOV: -0.2%; DEC: 0.6% (RELEASED 1/14)

C. INDEX OF CONSUMER CONFIDENCE. NOV: 109.5; DEC: 113.8; JAN: 116.8 (RELEASED 1/28).

D. MICHIGAN UNIVERSITY CONSUMER SENTIMENT INDEX. JAN: 97.4; DEC: 96.9 (RELEASED 1/31).

E. LJR REDBOOK WEEKLY SALES INDEX. +1.6% RELATIVE TO THE PREVIOUS WEEK (RELEASED 1/28)

6. INVESTMENT

A. DURABLE GOODS ORDERS (VOLATILE SERIES). +0.5% IN OCT; -1.6% IN NOV; -1.7% IN DEC (RELEASED 1/29).

B. BUSINESS INVENTORIES. SEP: +0.1%; OCT: +0.5%; NOV: +0.1% (RELEASED 1/15).

7. HOUSING AND CONSTRUCTION

A. HOUSING STARTS. OCT: 1.386M; NOV: 1.514M; DEC: 1.329M (RELEASED 1/22)

B. BUILDING PERMITS. OCT: 1.362M; NOV: 1.415M; DEC: 1.410M (RELEASED 1/22)

C. EXISTING HOME SALES. OCT:3.97M; NOV:4.01M; DEC: 3.87 (RELEASED 1/27)

D. NEW HOME SALES. OCT: 676,000; NOV: 791,000 (+17.7%); DEC: 783,000 (-1.0%) (RELEASED 2/4).

E. CONSTRUCTION SPENDING (ON RESIDENTIAL, NONRESIDENTIAL AND GOVERNMENT PROJECTS). DEC: -0.75 (1996 GROWTH: +4%).

Data sources:

First Union's Economic Data and Forecasts

Macro Data from the White House

BLS DATA ON PRODUCTIVITY AND COSTS



THE FED WILL TIGHTEN MONETARY POLICY (INCREASE INTEREST RATES) IF:

1. GDP IS GROWING TOO FAST (FASTER THAN ITS POTENTIAL GROWTH RATE).

2. THE UNEMPLOYMENT RATE IS TOO LOW (FALLING BELOW THE NATURAL UNEMPLOYMENT RATE).

3. PRICE INFLATION IS HIGH AND/OR INCREASING.

4. WAGES ARE INCREASING TOO FAST (HIGH RATE OF GROWTH OF LABOR COSTS).

GREENSPAN WARNING (JANUARY 21 TESTIMONY) THAT FED IS LIKELY TO TIGHTEN MONETARY POLICY IF LABOR COSTS (WAGE INFLATION) WILL START TO PICK UP BECAUSE SUCH AN INCREASE IN LABOR COSTS WOULD EVENTUALLY LEAD TO HIGHER INFLATION.