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Ventura County Board of Supervisors June 13, 2000 Page Two The FOMC drew heavily on the "Beige Book," a survey of the overall economic condition of the country, which is prepared by the staff of the Federal Reserve for the FOMC prior to its meetings. In the `Beige Book," the following conditions were identified: + The economy continued to expand with moderate to strong economic growth. a Consumer spending was strong and retail sales were in line with merchant expectations. a Commercial construction activity remained robust, though residential demand softened. a Overall manufacturing activity was strong with factories running near capacity. a There were more frequent reports of intensifying wage pressures as shortages of workers persisted. a Increasing input prices were noted in nearly all regions of the country. The economic reports released during the month were consistent with the Fed's observations. The unemployment rate dropped to 3.9%, the lowest rate in 30 years, while non-farm payrolls increased by a strong 340,000 jobs. The reports for factory orders, construction spending, and industrial production, along with the consumer sentiment data, were all very positive. The inflation figures, however, did back off of the recent feverish pace with producer prices declining 0.3% and consumer prices unchanged. Despite the sharp increase in rates by the Federal Reserve, interest rates generally did not rise very much. Interest rates for Treasury securities rose between 2 and 10 basis points during the month. Much of this is due to the current belief that the rate increases over the last year are starting to have an impact and that economic activity may be starting to slow. This may, in turn, mean that the Fed may be through raising rates for the time being. Given the current interest rate environment, we anticipate the County's yield to increase as we reinvest in a higher interest rate environment. Further, we continue to seek investment opportunities in order to optimize earnings (U. S. Treasury Market graph attached). Attached is a listing of market values for all investments for the month ending May 31, 2000. GASB Statement No. 31 states that variances between the cost of investments and the fair value of investments shall not be considered budgetary resources or uses of resources unless the value of investments is permanently impaired because of decreased issuer creditworthiness or it is determined that the Treasurer will be unable to hold investments to maturity. The following is a list of attached graphs: a Portfolio Average Monthly Balance a Average Portfolio Maturity a Balance Yield Comparison by Month 0 Portfolio Holdings by Instrument Type