Highlights
Although still overall on the soft side, economic conditions improved in the Beige Book released on March 8 with information collected on or before February 27. The Beige Book said,"Overall economic activity increased slightly in early 2023. Six Districts reported little or no change in economic activity since the last report, while six indicated economic activity expanded at a modest pace." Eight Districts reported slight-to-moderate growth, two were in neutral, and two remain weak. On net, this was the strongest Beige Book since July 2022 and reflects the sort of subpar growth Fed policymakers have warned about as a result of their efforts to fight inflation. The US economy may be avoiding an all-out recession, although some sectors are underperforming.
The report noted that"Labor market conditions remained solid," and that job gains remain on a modest-to-moderate pace"in most Districts despite hiring freezes in some firms and scattered reports of layoffs." There was a small improvement in labor supply,"though finding works with desired skills or experience remained challenging." While labor market conditions"generally remained tight, a few Districts noted that firms are becoming less flexible with employees and beginning to reduce remote work options."
Upward wage pressures are generally moderate,"though some Districts noted that wage pressures had eased somewhat," and are expected to ease"further in the coming year".
Price inflation"remained widespread, though price increases moderated in many Districts". The report said,"Several Districts reported input costs rose further, particularly for energy and raw materials, though there was some relief reported for freight and shipping costs. Some Districts noted that firms were finding it more difficult to pass on cost increases to their consumers." Housing prices"remained high, contributing to ongoing concerns about housing affordability." Overall prices are expected"to continue to moderate over the year".
The report noted that"Labor market conditions remained solid," and that job gains remain on a modest-to-moderate pace"in most Districts despite hiring freezes in some firms and scattered reports of layoffs." There was a small improvement in labor supply,"though finding works with desired skills or experience remained challenging." While labor market conditions"generally remained tight, a few Districts noted that firms are becoming less flexible with employees and beginning to reduce remote work options."
Upward wage pressures are generally moderate,"though some Districts noted that wage pressures had eased somewhat," and are expected to ease"further in the coming year".
Price inflation"remained widespread, though price increases moderated in many Districts". The report said,"Several Districts reported input costs rose further, particularly for energy and raw materials, though there was some relief reported for freight and shipping costs. Some Districts noted that firms were finding it more difficult to pass on cost increases to their consumers." Housing prices"remained high, contributing to ongoing concerns about housing affordability." Overall prices are expected"to continue to moderate over the year".
Definition
This book is produced roughly two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Fed district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.
Description
This report on economic conditions is used at FOMC meetings, where the Fed sets interest rate policy. These meetings occur roughly every six weeks and are the single most influential event for the markets. Market participants speculate for weeks in advance about the possibility of an interest rate change that could be announced upon the end of these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.
Frequency
Eight times a year
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.
Frequency
Eight times a year
