The Beige Book Essay

The Beige Book

            The Beige Book is an economic report published eight times a year. The Federal Reserve Bank regularly gathers information on current economic conditions from its districts. These information are obtained through reports from bank and branch managers, interviews with respected economists, businessmen, and market research experts. The Beige Book summarizes economic data by district and sector. There are about twelve expected district reports prepared by the Federal Reserve Bank. Each year, the Federal Bank provides a detailed analysis of these reports (a total of 64 reports) and gives recommendations to the federal government as to the prescribed monetary policy (interest rate determination – Federal Funds Rate).

            The Beige Book also makes a general prediction of the US economy (through some criteria). In practice, however, the directors of the Federal Reserve Bank prefer to make predictions by district and sector. Recommendations are passed to the federal government by district and sector. Much of the predictive value of the reports is applicable in the short-run. Long-run economic analysis is usually delegated to academics appointed by the Federal Reserve Bank (hired as consultants).

            According to its April 2009 report, manufacturing activity generally weakened across industries in most districts. Retail spending, especially that of Boston, remained at the bottom, although some districts showed improvement in sales in comparison with the previous period. In Boston and Philadelphia, residential real estate markets remained to be weak despite government efforts to increase subsidies to this particular sector. Spending on travel, commercial real-estate, and consumables decreased in all sectors by an average of about 10%. Bankers reported a general increase in loan defaults, especially in the Boston district.

            In the Boston district, rental concessions were rising, as the prices of rents continued to rise steadily. Construction activities were at its lowest since February 2007. Some public and private projects in the district were cancelled, due probably to lack of funds. Nonresidential construction was expected to decrease at the end of the year. Commercial activity in general declined by about 15%. Most of the experts argued that this was a result of the global financial crisis that hit the United States and Europe at the end of 2007.

            As one noted, the April 2009 Report of the Federal Reserve Bank revealed the effects of the global financial crisis in many of the districts and sectors of the US economy. The symptoms were visible: 1) fall in consumption, 2) decrease in commercial activities, 3) increases in loan defaults, 4) general fall of the prices of goods and services, and 5) increase in nonfinancial activities. These symptoms were also reflective of the state of health of the US economy – a primary target of the global financial crisis.

References

The Beige Book. April 2009 Report. Federal Reserve Bank of St.Louis Review.

April 2009 Beige Book Summary. Federal Reserve Bank of St. Louis Review.