For the first time since the Beige Book of May 2022, all 12 Fed district banks experienced at least some growth since the prior report. The current Beige Book provided anecdotal evidence for economic activity for the period roughly from late November through early January. Growth was almost universally described as slight-to-modest with only one district reporting firmer activity at a moderate pace (Dallas). The report was prepared by the Chicago Fed.

The report indicates that stronger than expected consumer spending helped end the year on an up note. Residential real estate activity was about unchanged from the prior report and commercial real estate sales"edged up". Expansion in nonfinancial services rose"slightly overall" while financial services saw"modest growth in lending and little change in asset quality overall." Manufacturing was a tad weaker. Energy activity"was mixed". More Beige Book respondents are said to be"optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy".

The labor market was up somewhat in half of the Districts and unchanged in the other half. There remains"difficulty finding skilled workers, and reports of layoffs remained rare". Wage growth was deemed at a"moderate pace" for most districts.

Price increases were generally most during the reporting period. The report said,"Contacts in most Districts reported modest increases in selling prices, though there were instances of flat or decreasing prices as well, particularly in the retail and manufacturing sectors. Input costs also rose, with contacts highlighting higher insurance prices, particularly for health insurance."

In looking ahead to the January 28-29 FOMC meeting, Fed policymakers will have evidence that the US economy continues to display above expectations growth with little sign of a recession on the horizon. At least for the moment, policymakers can remain cautious about easing restrictive monetary policy. On the maximum employment side of the dual mandate, current economic conditions are not causing rising unemployment. On the side of price stability, progress in disinflation continues but inflation readings have not yet sustainably reached the Fed's 2 percent objective.

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.

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