The New Beige Book - A Report You Must Read

The Beige Book is a report prepared by the Federal Reserve on the performance of the US economy based on inputs received from businesses, market experts, forex professionals and banks outside the Fed system. It does not represent the views of the US Fed. The report is published eight times a year in advance of the Federal Open Market Committee meeting. The information is gathered by each of the Fed branches in its respective district. The current edition of the Beige Book is based on information gathered before the 18th of November this year.

As per the latest Beige Book report, the overall economic activity including forex trading and others rose at a slow to moderate pace as compared to the period covered in the previous beige book. The positive growth story was true for all districts excepting St. Louis, where economic activity declined. Consumer spending rose modestly in most districts as per the new Beige Book report. The better part of the news was that manufacturing activity strengthened steadily almost across the nation. While, the immediate results of this growth may not be visible, an increase in manufacturing activity will eventually lead to more robust employment generation, which is the real panacea for sustainable economic growth in the US. Motor vehicle sales were also up in some of the districts suggesting that the US economy still has some steam left. While bank lending was sluggish and improved only slightly since the last Beige Book report, refinancing for homes grew more robustly. The improvement in home refinancing is a good indicator as the current economic crisis was triggered from this very sector of the economy. This has led to a lull in the real estate sector in the US and pulled the financial system down. With some turnaround in this sector, there is reason to hope for some cheer. However, on an overall basis, activity in the real estate sector remained lackluster. Hopefully, the spurt in home refinancing should carry forward and help uplift the real estate sector in an overall manner so that construction activity also picks up and results in employment generation.

Along with manufacturing, agricultural, mining and energy related activities were also on the uptick suggesting that the core sectors are beginning to turnaround, which could eventually generate more employment and increase expendable incomes and lead to a sustainable increase in consumer demand. Unfortunately, during the period under review for the Beige Book report, hiring remained subdued, while incomes remained stable, with very little growth. It appears that the impact of growth in manufacturing and other sectors has as yet not resulted in any significant growth in employment. This could probably take some time as companies may be in a wait and watch mode to evaluate if the growth is sustainable. Moreover, any growth in new jobs could have been offset by a loss in jobs in other sectors like the government amongst others. There was some growth in manufacturing and other few sectors however, inflation remained subdued and prices did not see much of an upswing. While, subdued inflation may be viewed positively, it also suggests a lackluster economy as growth and spending would fuel demand and put pressure on price lines. Hopefully, the moderate growth trend in the US economy should continue and snowball into a higher growth trend supported by enhanced employment generation leading to higher consumer spending and demand generation.


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