Beige Book in the Classroom
Beige Book discussion questions and suggested answers
What is the Beige Book?
The Beige Book is a report on the nation’s current economic conditions that is published eight times a year by the Federal Reserve. Each of the 12 Federal Reserve Bank districts gathers anecdotal information on its region’s economy through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by district and industrial sector. A summary of the 12 districts’ reports is prepared by a designated Federal Reserve Bank on a rotating basis. Cleveland prepared the national summary for the November cycle. Read more
Study Questions: Beige Book, published November 2012
- Characterize the overall national economic activity reported by the 12 Federal Reserve districts in the November 2012, Beige Book.
- Economic activity expanded at a measured pace across the districts. The Fourth (Cleveland), Fifth (Richmond), Sixth (Atlanta), Seventh (Chicago), Tenth (Kansas City), Eleventh (Dallas) and Twelfth (San Francisco) districts grew at a modest pace, while the Eighth (St. Louis) and Ninth (Minneapolis) districts reported a somewhat stronger increase in activity. Economic activity grew at a slower rate in the First District (Boston) and weaker conditions in the Second (New York) and Third (Philadelphia) districts were attributed to Hurricane Sandy. Manufacturing weakened overall, with slowing or outright contraction in seven of the 12 districts. Agricultural conditions were mixed; drought conditions persisted in several districts including the Sixth, Seventh, and Tenth, but in other areas there was solid production.
- What were some of the conditions reported in the retail sector?
- Consumer spending increased moderately in most districts. Contacts in the Third District reported slower growth since the last report. Apparel sales picked up in the First District, and the Fifth District indicated that home and garden stores reported stronger sales ahead of Hurricane Sandy. The First and Seventh districts noted an improvement in furniture while that category declined in the Fourth District. The Seventh District reported flattening in electronic sales, while the Twelfth District reported significant sales gains for consumer technology products. Auto sales varied by district with the Fourth , Eighth , Ninth , and Twelfth districts indicating strength. Car sales in the Fifth District were mixed; in the Second District they had flattened.
- Hurricane Sandy had both positive and negative implications for the transportation, agricultural, and banking sectors in different districts. Explain.
- While the Fourth District reported fewer freight shipments, which their contacts attributed in part to hurricane disruptions, the Tenth District noted a pickup in trucking traffic due to emergency food shipments in the wake of Hurricane Sandy. In the agricultural sector, damage from Hurricane Sandy was localized and mainly in coastal areas. The Fifth District stated that most Virginia farmers were relieved that Hurricane Sandy brought much needed rain without significant damage to the corn and soybeans still in the fields. In the Third District banks reported widespread bank and ATM closings due to Hurricane Sandy.
- Retail sales were exceptionally weak in the New York City area in early November due to widespread power outages, store closings, and accessibility problems for workers and customers after Hurricane Sandy. One major chain sees this as a reason to hire more holiday-season staff than in 2011. Explain.
- Many residents in the region need to replace destroyed or damaged property, which has stoked the expectation that all of the lost sales will be made up in the weeks ahead.
- Give some examples showing how the residential real estate sector improved across most districts.
- The Fourth District reported that the number of single-family housing starts had increased since the last report and from a year ago; most sales contracts were in higher price-point categories. The Fifth District noted more residential work in the high-end home category for the first time in three years and builders cited pent-up demand in the first-time buyer segment. The Ninth District indicated that segments of construction and real estate were growing at a double-digit clip.
- What was the outlook for loan demand across the 12 districts during this Beige Book period?
- Loan demand generally was either mixed or slightly stronger across most districts in recent weeks. In the Second District for instance, demand for consumer and especially commercial and industrial loans weakened, but commercial and residential mortgage demand was steady. In the Seventh District small business loan demand experienced modest growth, but a decrease in credit demand occurred among middle-market customers.
- Discuss how contacts in various districts describe how the uncertainty about the fiscal cliff has affected the economic climate.
- Manufacturing contacts from five of the 12 districts expressed concern about the outlook for 2013, in part, due to the uncertainty regarding the outcome of the fiscal cliff. In the Fourth District there is concern about potential tax increases in 2013 and the effect they might have on household spending, especially on those in higher-income brackets. In the Seventh District several business contacts reported that given heightened uncertainty surrounding the near-term economic outlook, they were reluctant to make capital expenditures beyond productivity enhancements. In the Tenth District several business contacts commented that uncertainty regarding political, economic, and tax policies was inhibiting growth, limiting business investment, and delaying hiring plans.
- Describe overall economic activity in the Fourth District.
- Economic activity grew at a modest pace since the last report. Overall, manufacturing orders and production rose. Residential and nonresidential construction activity increased, with particular strength in the multi-family segment. Realtors reported a rise in the purchase of existing homes, while retailers and auto dealers saw higher sales during October relative to year-ago levels. Hiring was sluggish except in the auto industry, where hiring continued at a robust pace, and in the construction industry, where payrolls began to grow.
- What does the Beige Book say about capacity utilization in the Fourth District manufacturing sector?
- There was little change in capacity utilization. Rates were within or slightly below their normal range. Several companies, particularly those serving the energy and transportation sectors, reported plans to expand capacity.
- What were the manufacturing conditions for the Fourth District?
- Factories reported that new orders and production increased on net during the past six weeks. Companies citing increases were mainly linked to the aerospace, construction machinery, medical device, motor vehicle, and oil and gas industries. Compared to prior–year levels, production activity was mixed. Several producers pointed to rising inventories, but said that they are manageable.