What is the Fed’s Beige Book and What Does It Tell Us?

Federal Reserve Building

The Federal Reserve Bank, commonly referred to as “the Fed” is the central bank of the United States.

Eight times per year, the Fed publishes the Beige Book, which summarizes anecdotal information on current economic conditions in each district.

There are twelve districts and they don’t fall along state lines. The districts were established in 1913 when the Fed was created.

The information in the Beige Book comes from bank and branch directors, and is a summary of their interviews with business contacts, economists, market experts and other sources.

The information in the Beige Book is summarized by district. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.

The most recent Beige Book was published on October 19, 2022.

The national perspective reported by the Fed says that economic activity for the United States as a whole expanded modestly since their previous report, but conditions varied across districts.

Four noted flat activity and two cited declines, with slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions.

Retail spending was relatively flat, reflecting lower discretionary spending, and auto dealers noted sustained sluggishness in sales stemming from limited inventories, high vehicle prices, and rising interest rates.

Travel and tourist activity rose strongly, boosted by continued strength in leisure activity and a pickup in business travel.

Manufacturing activity held steady or expanded in most Districts in part due to easing in supply chain disruptions, though there were a few reports of output declines.

Demand for non-financial services rose.

Activity in transportation services was mixed, as port activity increased strongly whereas reports of trucking and freight demand were mixed.

Rising mortgage rates and elevated house prices further weakened single-family starts and sales, but helped buoy apartment leasing and rents, which generally remained high.

Commercial real estate slowed in both construction and sales amid supply shortages and elevated construction and borrowing costs, and there were scattered reports of declining property prices. Industrial leasing remained robust, while office demand was tepid.

Bankers in most reporting districts cited declines in loan volumes, partly a result of shrinking residential real estate lending.

Energy activity expanded moderately, whereas agriculture reports were mixed, as drought conditions and high input costs remained a challenge.

Outlooks grew more pessimistic amidst growing concerns about weakening demand.

Price growth remained elevated, though some easing was noted across several districts.

Significant input price increases were reported in a variety of industries, though some declines in commodity, fuel, and freight costs were noted.

Growth in selling prices was mixed, with stronger increases reported by some districts and a moderation seen in others.

Some contacts noted solid pricing power over the past six weeks, while others said cost pass through was becoming more difficult as customers push back.

Looking ahead, expectations were for price increases to generally moderate.

Employment continued to rise at a modest to moderate pace in most districts.

Several districts reported a cooling in labor demand, with some noting that businesses were hesitant to add to payrolls amid increased concerns of an economic downturn.

There were also scattered mentions of hiring freezes.

Overall labor market conditions remained tight, though half of districts noted some easing of hiring and/or retention difficulties.

Competition for workers has led to some labor poaching by competitors or competing industries able to offer higher pay.

Wage growth remained widespread, though an easing was reported in several districts.

Some businesses said elevated inflation and higher costs of living were pushing wages up, coupled with upward pressure from labor market tightness.

Contacts expect wage growth to continue as higher pay remains essential for retaining talent in the current environment.

I thought the most interesting part of this report is that consumers are pushing back on the costs being passed onto them in the higher prices — consumers are probably not buying certain things for numerous reasons.

The other interesting information was the workforce poaching — which is basically taking employees away from competitors through increased pay. Also, it looks promising that wage growth is increasing.

What did you find interesting in this report?

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