Highlights
There is little change in economic conditions across the Fed's 12 district banks according to the Beige Book issued May 31 with information collected through May 22 and covering roughly from early April to mid-May. The current report is compiled by the Federal Reserve Bank of Chicago. Overall economic growth appears stalled. Of the 12 districts, 6 report conditions as little changed, unchanged, flat, or stable (Boston, Cleveland, Richmond, Chicago, St. Louis, and Kansas City). Two districts report slight or moderate declines in activity (New York and Philadelphia). Four districts said growth is some variation of slight or modest (Atlanta, Minneapolis, Dallas, and San Francisco).
Importantly,"Consumer expenditures were steady or higher in most Districts, with many noting growth in spending on leisure and hospitality." Modest consumer spending has helped keep the economy from slipping into recession while the Fed works to address imbalances in the labor market and elevated inflation through more restrictive monetary policy.
The Beige Book noted that,"Employment increased in most Districts, though at a slower pace than in previous reports." Shortages of workers with the right skillsets remains an issue, although"Contacts across Districts also noted that the labor market had cooled some, highlighting easier hiring in construction, transportation, and finance." Wage growth was described as modest.
Many districts continue to report moderate price increases and most districts"expected a similar pace of price increases in the coming months." The report said,"Consumer prices continued to move up due to solid demand and rising costs, though several Districts noted greater price sensitivity by consumers than in the prior report. Overall, nonlabor input costs rose, but many contacts said cost pressures had eased and noted price declines for some inputs, such as shipping and certain raw materials." It is also seen that shelter costs increased"slightly" in most Districts.
The FOMC takes the contents of the Beige Book into account in setting monetary policy. One of the questions about the outcome of the June 13-14 FOMC meeting is whether policymakers will find that financial conditions have tightened to the point where another rate hike might not be needed. The Beige Book said,"Financial conditions were stable or somewhat tighter in most Districts." However, with inflation remaining elevated and expected to continue while the labor market remains strong, the possibility of another rate hike will hinge on the upcoming May inflation reports particularly the CPI at 8:30 ET on June 13.
Importantly,"Consumer expenditures were steady or higher in most Districts, with many noting growth in spending on leisure and hospitality." Modest consumer spending has helped keep the economy from slipping into recession while the Fed works to address imbalances in the labor market and elevated inflation through more restrictive monetary policy.
The Beige Book noted that,"Employment increased in most Districts, though at a slower pace than in previous reports." Shortages of workers with the right skillsets remains an issue, although"Contacts across Districts also noted that the labor market had cooled some, highlighting easier hiring in construction, transportation, and finance." Wage growth was described as modest.
Many districts continue to report moderate price increases and most districts"expected a similar pace of price increases in the coming months." The report said,"Consumer prices continued to move up due to solid demand and rising costs, though several Districts noted greater price sensitivity by consumers than in the prior report. Overall, nonlabor input costs rose, but many contacts said cost pressures had eased and noted price declines for some inputs, such as shipping and certain raw materials." It is also seen that shelter costs increased"slightly" in most Districts.
The FOMC takes the contents of the Beige Book into account in setting monetary policy. One of the questions about the outcome of the June 13-14 FOMC meeting is whether policymakers will find that financial conditions have tightened to the point where another rate hike might not be needed. The Beige Book said,"Financial conditions were stable or somewhat tighter in most Districts." However, with inflation remaining elevated and expected to continue while the labor market remains strong, the possibility of another rate hike will hinge on the upcoming May inflation reports particularly the CPI at 8:30 ET on June 13.
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
