Eight times a year, the Federal Reserve issues the Beige Book, a snapshot of business conditions in each of the Fed’s 12 regional bank districts. The findings are all anecdotal; there are no numbers. The Beige Book is updated two weeks before each meeting of the Fed’s policymaking meeting in Washington.
Staffers at each of the 12 regional banks compile the information. They do so after contacting businesses, economists and other financial experts by phone, through questionnaires and email. The businesses range from retailers and homebuilders to hotels and restaurant owners.
The idea is to detect trends in consumer spending, manufacturing and real estate, among other areas. Consumer spending is particularly important because it accounts for about 70 per cent of gross domestic product. GDP is the value of all goods and services produced in the United States.
The staffers also conduct separate monthly surveys of manufacturers in each region.
The staff of each Fed region pays particular attention to that region’s major industries. For example, in the Atlanta Fed region, which includes Florida, staffers focus in particular on tourism. The energy industry is highlighted in the Dallas Fed region report; farming is prominent in the Kansas City Fed region.
The regional staffs compile the responses into 12 regional reports. Each regional report appears in the Beige Book, along with an introductory section that summarizes the findings of all the regions. The writing of the introduction is rotated among the 12 regional banks.
The report becomes part of the information discussed by the Federal Open Market Committee. That’s the group, composed of Fed board members in Washington and regional bank presidents, who meet eight times a year to determine the Fed’s approach to interest rates and other policies.
The Beige Book is compiled slightly more than a week before it’s published. That makes it relatively current compared with many other economic indicators, which can lag a month or more behind the period they report on.
The Beige Book’s formal title is the “Summary of Commentary on Current Economic Conditions by Federal Reserve District.” The idea for it came in 1970 from Arthur Burns, then the Fed chairman.
Before then, each of the regional bank presidents would present information at the meeting obtained from business contacts in their regions. Burns thought the information would be more useful if it were written down and presented to the FOMC members before they met.
The Beige Book began life as the Red Book. The informal name changed when the colour of the report’s cover changed. It was first publicly released in 1983. That’s when the Fed began releasing the reports two weeks before each policymaking meeting. It did so under an agreement with members of Congress who wanted more Fed openness.