Highlights
Economic activity increased at a"slight to moderate pace in eleven" Fed Districts in early July, and was unchanged in one District. In the previous report, economic activity had expanded at a"slight to moderate pace" in ten districts, was flat in one and down in one.
On the inflation front,"prices increased moderately overall". Non-labor input costs were up in a variety of industries, partly due to energy, transportation, and raw material costs. Some associated these costs to the Middle-East conflict and others to tariffs.
Looking ahead,"expectations for price growth over the coming months varied across Districts". Some districts expect the pace of increase to remain the same while others expect an inflation slowdown.
On the activity front, the economy is"generally" expected to expand, although several districts reported"elevated uncertainty in the outlook for fuel costs".
Employment rose on balance, although seven districts experienced"little to no change". The picture is still an improvement from the previous report, as five districts are reporting employment gains, up from one district in the prior report.
The Beige Book showed tradeoffs that higher prices have forced consumers to do, as they spent more on fuel while inflation"dampened sales in other categories", notably in discretionary items. Several districts also saw consumers trade down to more affordable options. In the auto sector, consumers are holding on longer to their vehicles, translating into higher spending on repairs, while auto sales were little changed.
Tourism increased, benefiting in some districts from the World Cup effect.
In manufacturing,"production grew modestly to moderately" in most districts, led by data center, machinery, and defense sectors. In real estate and construction, activity was"slightly" stronger, also feeling the impact of data centers.
Meanwhile, transportation improved"modestly" and the Beige Book cited"stable" financial conditions and a modest increase in consumer and commercial loan activity.
Activity in other services"was up modestly".
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