Highlights
The most recent Beige Book reflects conditions across the economies of the 12 district banks. The report covers the period between mid-April and the third week of May. The anecdotal evidence for the economy shows that conditions have weakened since the prior report. Only three districts report any growth (Richmond, Atlanta, and Chicago) but that is only deemed slight or mild. Three districts reported growth as flat or little changed (Cleveland, St. Louis, and Dallas). Five districts report a slight or modest decline in activity (Boston, New York, Philadelphia, Minneapolis, and San Francisco) and another one reports a moderate decline (Kansas City). The Beige Book said, All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions.
In two instances the district switched from growth to decline since the prior report (Boston, Kansas City), one dips to neutral from growth (Dallas), and one rises from neutral to growth (Chicago). The overall tone of the report points to shaken confidence that has fallen further since the start of the year.
With only ¼ of the districts reporting growth in current conditions and 1/2 in at least slight contraction, the Beige Book readings since the start of the year suggest the US economy is slipping toward recession. The Beige Book indicates that the near-term outlook is mixed. It said, On balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to the previous report. However, a few District reports indicate the outlook has deteriorated while a few others indicate the outlook has improved.
The Beige Book contents will counsel policymakers at the upcoming FOMC meeting on June 17-18. The implications for monetary policy suggest that the FOMC will find cause for concern in increased risks to the economy, but also enough uncertainty surrounding economic behavior by households and businesses that it will wait for more definitive information in the hard data.
The FOMC will take into account that the Beige Book terms the labor market as little changed since the previous report. It continued, Most Districts described employment as flat, three Districts reported slight-to-modest increases, and two Districts reported slight declines. Many Districts reported lower employee turnover rates and more applicants for open positions. Comments about uncertainty delaying hiring were widespread. All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive. Wage growth is said to remain modest, although many Districts reported a general easing in wage pressures.
The influence of unsettled policy on trade and tariffs appears to be stalling progress on disinflation. The Beige Book said, Prices have increased at a moderate pace since the previous report. There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few Districts described these expected cost increases as strong, significant, or substantial. All District reports indicated that higher tariff rates were putting upward pressure on costs and prices. However, contacts' responses to these higher costs varied, including increasing prices on affected items, increasing prices on all items, reducing profit margins, and adding temporary fees or surcharges. Contacts that plan to pass along tariff-related costs expect to do so within three months. As such, Fed policymakers will have less confidence that the disinflationary trend will resume in the immediate future.
Fed Chair Jerome Powell has spoken about the tension that can develop in the dual mandate for maximum employment and price stability. The Beige Book points to economic conditions that leaves monetary policy on the inflation fighting path with little chance of a rate cut in the near future. While there are signs of further cooling in the job market, the numbers of layoffs are not causing unemployment to rise quickly, and if hiring is slower, it is still taking place.
In two instances the district switched from growth to decline since the prior report (Boston, Kansas City), one dips to neutral from growth (Dallas), and one rises from neutral to growth (Chicago). The overall tone of the report points to shaken confidence that has fallen further since the start of the year.
With only ¼ of the districts reporting growth in current conditions and 1/2 in at least slight contraction, the Beige Book readings since the start of the year suggest the US economy is slipping toward recession. The Beige Book indicates that the near-term outlook is mixed. It said, On balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to the previous report. However, a few District reports indicate the outlook has deteriorated while a few others indicate the outlook has improved.
The Beige Book contents will counsel policymakers at the upcoming FOMC meeting on June 17-18. The implications for monetary policy suggest that the FOMC will find cause for concern in increased risks to the economy, but also enough uncertainty surrounding economic behavior by households and businesses that it will wait for more definitive information in the hard data.
The FOMC will take into account that the Beige Book terms the labor market as little changed since the previous report. It continued, Most Districts described employment as flat, three Districts reported slight-to-modest increases, and two Districts reported slight declines. Many Districts reported lower employee turnover rates and more applicants for open positions. Comments about uncertainty delaying hiring were widespread. All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive. Wage growth is said to remain modest, although many Districts reported a general easing in wage pressures.
The influence of unsettled policy on trade and tariffs appears to be stalling progress on disinflation. The Beige Book said, Prices have increased at a moderate pace since the previous report. There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few Districts described these expected cost increases as strong, significant, or substantial. All District reports indicated that higher tariff rates were putting upward pressure on costs and prices. However, contacts' responses to these higher costs varied, including increasing prices on affected items, increasing prices on all items, reducing profit margins, and adding temporary fees or surcharges. Contacts that plan to pass along tariff-related costs expect to do so within three months. As such, Fed policymakers will have less confidence that the disinflationary trend will resume in the immediate future.
Fed Chair Jerome Powell has spoken about the tension that can develop in the dual mandate for maximum employment and price stability. The Beige Book points to economic conditions that leaves monetary policy on the inflation fighting path with little chance of a rate cut in the near future. While there are signs of further cooling in the job market, the numbers of layoffs are not causing unemployment to rise quickly, and if hiring is slower, it is still taking place.
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
