The Beige Book

October 12, 2012 in Economy

The Beige Book, also known as the “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” is a survey of prevailing economic conditions published by the United States Federal Reserve Board.

Fed Beige Book

 

 

Published eight times a year, usually two Wednesdays in advance of the Federal Open Market Committee meetings, the Beige Book is a compilation of economic information collected by the 12 Federal Reserve Banks based on their interactions with business contacts, economic analysts, market experts and directors in each of their Districts.

This information is summarized and collated by District and sector. The overall summary of the 12 district reports is prepared on a rotational basis by one of the 12 Federal Reserve Banks.

Beige Book As Economic indicator

The Beige Book has the status of a significant economic indicator and gives an insight into how the US Fed reaches important regulatory conclusions. It provides an excellent broad-brush view of the US economy and its major moving parts. In view of its release schedule, which is just before an FOMC meeting, analysts scour its fine print to get an insight into what could transpire the meeting. To that extent, the Beige Book may yield valuable clues into future monetary policy actions by the Fed, because it is known to contain many forward-looking comments.

The Beige Book is also utilized for its focus on economic activity by geographic region, a facility not usually found elsewhere, the common focus being on industrial sectors. Some of the Federal Reserve Banks also provide information on the state of service industries in the district, an important component of the national GDP.

The Beige Book is not known to cause major movements in the markets, yet it is important to all market participants for the reasons mentioned above.

Structure

The latest Beige Book, published October 10, 2012, was structured along the following lines:

Summary

The summary covered economic segments such as Consumer Spending and Tourism, Real Estate and Construction, Manufacturing, Non-Financial Services, Banking and Finance, Agriculture and Natural Resources, and Employment Wages and Prices.

Districts Covered by The Beige Book

Sector wise details, mostly anecdotal, were provided for various economic segments for each of the 12 districts.

The Latest Beige Book

Issued October 10, the latest Beige Book said the US economy was expanding only modestly though there was little change in the labor market. The report pointed to improvements in housing and sales of autos but expressed concern on consumer spending, “generally reported to be flat to up slightly since the last report.”

The report was issued ahead of the FOMC meet in Washington on October 23-24. It seemed to bolster the view of Fed Chairman Ben Bernanke that economic growth was not sufficient to correct the unemployment prevailing in the economy, and proved his point that QE3 was called for.

Effect on the Forex market

The Forex market was generally unmoved by the modest improvement in the US economy reported in the Beige Book. Yet it is eagerly awaited by the currency markets and reflected in economic calendars as an event of high importance. Traders value it for its emphasis on information collected with “an ear to the ground,” rather than raw statistical data.

0 responses to The Beige Book

1 trackback