Highlights
The Beige Book covered activity across the 12 Fed district banks for the period between late February and early April. The report said, Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports. In the current report, five districts reported growth compared to four in the prior report, but in all cases growth was only slight (Boston, Richmond, Atlanta, Kansas City, and Dallas). The number of districts reporting growth was flat declined to three in the current report from six in the last one (Cleveland, Chicago, and St. Louis). The number of districts seeing weaker activity rose to four from two (New York, Philadelphia, Minneapolis, and San Francisco).
The overall tone of the report reflects that conditions in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose. Since late December 2024, there has been a steady slide toward an economic downturn in the anecdotal evidence the highlights increased risk of recession.
The report noted that employment was little changed to up slightly in most Districts, with one District reporting a modest increase, four reporting a slight increase, four reporting no change, and three reporting a slight decline. This is a slight deterioration from the previous report with a few more Districts reporting declines. Declines are larger for services to households than for businesses. The most notable declines in headcount were in government roles or roles at organizations receiving government funding. Hiring was broadly slower and many business reported waiting to hire until there is more clarity on economic conditions.
The report continued, Most Districts and markets reported an improvement in overall labor availability, although there were some reports of constraints on labor supply resulting from shifting immigration policies in certain sectors and regions. Wages generally grew at a modest pace, as wage growth slowed from the previous report in multiple Districts. The rebalancing of labor market conditions from workers shortages is now over.
Reports about inflation were little changed from the prior Beige Book, although there was anticipation of higher costs as a consequence of tariffs. Prices increased across Districts, with six characterizing price growth as modest and six characterizing it as moderate, similar to the previous report. Most Districts noted that firms expected elevated input cost growth resulting from tariffs. Many firms have already received notices from suppliers that costs would be increasing. Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy. Most businesses expected to pass through additional costs to customers. However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms.
When the FOMC meets on May 6-7, it will be faced with what Fed Chair Jerome Powell has called tension between the demands of the dual mandate for maximum employment and price stability. The present data for the labor market suggests that while it has cooled and is cooling further, it has not deteriorated significantly. On the other hand, even though the inflation reports have not yet shown that progress on disinflation is stalled or reversing, there seems a credible threat of substantial price increases. Certainly the surveys of inflation expectations indicate that higher prices are thought to be on the near horizon and higher over the medium term as well.
The overall tone of the report reflects that conditions in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose. Since late December 2024, there has been a steady slide toward an economic downturn in the anecdotal evidence the highlights increased risk of recession.
The report noted that employment was little changed to up slightly in most Districts, with one District reporting a modest increase, four reporting a slight increase, four reporting no change, and three reporting a slight decline. This is a slight deterioration from the previous report with a few more Districts reporting declines. Declines are larger for services to households than for businesses. The most notable declines in headcount were in government roles or roles at organizations receiving government funding. Hiring was broadly slower and many business reported waiting to hire until there is more clarity on economic conditions.
The report continued, Most Districts and markets reported an improvement in overall labor availability, although there were some reports of constraints on labor supply resulting from shifting immigration policies in certain sectors and regions. Wages generally grew at a modest pace, as wage growth slowed from the previous report in multiple Districts. The rebalancing of labor market conditions from workers shortages is now over.
Reports about inflation were little changed from the prior Beige Book, although there was anticipation of higher costs as a consequence of tariffs. Prices increased across Districts, with six characterizing price growth as modest and six characterizing it as moderate, similar to the previous report. Most Districts noted that firms expected elevated input cost growth resulting from tariffs. Many firms have already received notices from suppliers that costs would be increasing. Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy. Most businesses expected to pass through additional costs to customers. However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms.
When the FOMC meets on May 6-7, it will be faced with what Fed Chair Jerome Powell has called tension between the demands of the dual mandate for maximum employment and price stability. The present data for the labor market suggests that while it has cooled and is cooling further, it has not deteriorated significantly. On the other hand, even though the inflation reports have not yet shown that progress on disinflation is stalled or reversing, there seems a credible threat of substantial price increases. Certainly the surveys of inflation expectations indicate that higher prices are thought to be on the near horizon and higher over the medium term as well.
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
