1. Economic Indicators: Overview
  2. Economic Indicators: Beige Book
  3. Economic Indicators: Business Outlook Survey
  4. Economic Indicators: Consumer Confidence Index (CCI)
  5. Economic Indicators: Consumer Credit Report
  6. Economic Indicators: Consumer Price Index (CPI)
  7. Economic Indicators: Durable Goods Report
  8. Economic Indicators: Employee Cost Index (ECI)
  9. Economic Indicators: Employee Situation Report
  10. Economic Indicators: Existing Home Sales
  11. Economic Indicators: Factory Orders Report
  12. Economic Indicators: Gross Domestic Product (GDP)
  13. Economic Indicators: Housing Starts
  14. Economic Indicators: Industrial Production
  15. Economic Indicators: Jobless Claims Report
  16. Economic Indicators: Money Supply
  17. Economic Indicators: Mutual Fund Flows
  18. Economic Indicators: Non-Manufacturing Report
  19. Economic Indicators: Personal Income and Outlays
  20. Economic Indicators: Producer Price Index (PPI)
  21. Economic Indicators: Productivity Report
  22. Economic Indicators: Purchasing Managers Index (PMI)
  23. Economic Indicators: Retail Sales Report
  24. Economic Indicators: Trade Balance Report
  25. Economic Indicators: Wholesale Trade Report

By Ryan Barnes

Release Date: Two Wednesdays before every Federal Open Market Committee (FOMC) meeting, 8 times per year
Release Time: 2:00pm Eastern Standard Time
Coverage: Anecdotal and discussion-based summaries of regional economic activity
Released By: Federal Reserve Board; National summary authored by rotating Fed district
Latest Release: http://www.federalreserve.gov/FOMC/BeigeBook/2007/

Background
Made public in 1983, the Summary of Commentary on Current Economic Conditions by Federal Reserve District, or Beige Book, as it is known, has a different style and tone than many other indicators. Rather than being filled with raw data, the Beige Book takes a more conversational approach. The book has 13 sections in total; 12 regional reports from each of the member Fed district banks, preceded by one national summary drawn from the individual reports that follow it. This is the first chance investors have to see how the Fed draws logical and intuitive conclusions from the raw data presented in other indicator releases.

The Beige Book is published eight times per year, just before each of the Federal Open Market Committee (FOMC) meetings. While it is used by committee members during the meeting itself, it does not carry more clout than other data values and indicators. There is a lot of real-time data that the Fed has at its disposal and, unfortunately, notes from the FOMC meetings themselves are currently not public information.

The Beige Book aims to give to give a broad overview of the economy, bringing many variables and indicators into the mix. Discussion will be about things such as labor markets, wage and price pressures, retail and ecommerce activity and manufacturing output. Investors can see comments that are forward-looking; the Beige Book will contain comments that look to predict trends and anticipate changes over the next few months or quarters.

What it Means for Investors
The Beige Book by itself is not likely to have a big effect on the markets in the short term, mainly because no new data series is presented here.

Investors and Fed watchers look to the Beige Book to gain insight into the next FOMC meeting. Is there language that shows fear about inflation? Do the reports suggest that the economy needs a financial boost to continue growing? This is the critical information that will be analyzed in the Beige Book.

To read the Beige Book effectively, one must become accustomed to "Fed speak", a special verbiage of measured remarks intentionally designed to say a little without ever saying a lot. The last thing the Fed wants to do with its words is corner itself into a pre-supposed policy decision prior to the next FOMC meeting. Investors won't ever see a definitive statement about the Fed going one way or the other with monetary policy, but there may be valuable clues in the Beige Book - at least for the trained eye. (For related reading, see Formulating Monetary Policy.)

The Fed directors and their staffs will use their very long proverbial arms to obtain an economic pulse that can't be found in any other indicator's report. They will interview business leaders, bank presidents, members of other Fed boards and hundreds of other informal networks before writing the reports that will be compiled in the Beige Book.

Investors who hold investments that conduct business in specific regions of the country may find valuable information about how those areas are performing as a whole. For instance, a stockholder in a regional bank operating in the Southeastern U.S. would want to know what the Atlanta Fed Bank says about the health of that region.

Occasionally, the Beige Book will give evidence that may contradict what a previous indicator has presented; the Employment Report may suggest that there is slack in the labor market, while Beige Book reports may give anecdotal evidence that wage pressures are forming, or that certain specific labor markets are tight. (For more on this topic, read Surveying The Employment Report.)



On rare occasions, the Beige Book will be released at a time when information is badly needed in the markets; shock events like the September 11, 2001, terrorist attacks or a stock market crash can effectively wipe the data slate clean, and investors will count on the Fed to help describe the relative state of affairs during these tumultuous times.

Strengths:

  • Contains forward-looking comments - the Fed districts aim to draw relative conclusions in the Beige Book, not just regurgitate facts already presented
  • Gives investors a "man on the street" perspective of economic health by taking first-hand accounts from business owners, economist, and the like
  • Aims to put pieces from different reports together into an explanatory whole, giving qualitative measurements instead of quantitative figures
  • It's the only indicator that gives reports by geographic region, rather than just by industry group or sector.
  • Most regions will report on the state of the service industries, an area not well covered in other indicator reports, although it is a large component of real gross domestic product.

Weaknesses:
  • Rarely is any new statistical data presented, only anecdotal reports
  • Filled with measured "Fed-speak"
  • Specific industry conclusions are hard to draw from the report.
  • Each Fed district can use its discretion on what to include in its report; one region may discuss manufacturing activity while others don't report on the topic.
  • Private forecasts compiled by economists and analysts tend to closely match what is reported in the Beige Book, so estimates rarely change following the release.

The Closing Line
The Beige Book is not likely to send shock waves through the market on its release, but it provides an original point of view about economic activity and is a marked departure from the dry raw data releases of the other indicators. It also gives investors insight into how the Fed approaches its monetary policy decisions and responsibilities. Economic Indicators: Business Outlook Survey

Related Articles
  1. Insights

    Fed Beige Book Calls Economic Expansion "Modest"

    The Fed described economic growth, a key issue In the presidential elections, as modest or moderate in most of its 12 districts
  2. Investing

    CPI, Beige Book and Other Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  3. Investing

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  4. Personal Finance

    Top 5 Books to Become a Professional Trader

    For people who want to learn how to trade and invest for themselves, there are a wealth of excellent books on trading available to learn from.
  5. Investing

    Market Value Versus Book Value

    Understanding the difference between book value and market value is a simple yet fundamentally critical component to analyze a company for investment.
  6. Investing

    The Difference Between Book and Market Value

    Book value is the price paid for an asset. It never changes as long as the asset is owned. Market value is the current price at which the asset can sell.
  7. Investing

    Investing Books It Pays To Read

    We provide some classic and lesser-known titles to add to your collection.
  8. Insights

    Translating "Fed Speak" Into Plain English

    Confused by the Fed's lingo? Find out what it can tell you and learn how to decipher it.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center