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. Read more 

Study Questions: Beige Book, published April, 2011

  1. Characterize the overall national economic activity reported by the 12 Federal Reserve districts in the April 13, 2011, Beige Book report.
    • Reports from the 12 districts indicate that economic activity continued to improve. Most districts described the gains as moderate and widespread across sectors. Manufacturing took the lead, with almost every district reporting examples of increased hiring. All districts reported slight gains in consumer spending except Richmond, where retail sales were weak, and Boston, where sales were mixed. Real estate performance varied across districts. Tourism strengthened in New York, Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco. Non-financial service firms reported expansion. Reports from transportation firms were mostly positive, with contacts in the Cleveland, Richmond, and Atlanta districts reporting an increase in freight transportation volume. Most reported that labor market conditions were stronger than in their last reports. Varying degrees of drought conditions persisted in the Atlanta, Kansas City and Dallas districts, and the energy industry strengthened since the last report.
  2. Pick three districts from the most recent Beige Book and compare employment the manufacturing, banking and finance, and labor market sectors from each district. What does the comparison tell you about each sector?
    • In the Fifth District (Richmond), manufacturing activity continued to expand at a solid pace in March. An auto parts supplier said that orders at his plant had increased beyond available capacity, and he indicated that lead times had increased due to a scarcity of materials. In the Sixth District (Atlanta), manufacturers reported strong growth in new orders and production. And in the Eleventh District (Dallas), demand for construction-related products improved slightly; cement, glass, and primary metals firms and some lumber manufactures reported some increase in activity.
    • In banking, activity picked up across the Fifth District (Richmond), and most of the bank officials contacted noted a marked increase in interest from business clients, often in restarting projects that had been delayed over the past two years. But in the Sixth District (Atlanta), bankers reported that demand for most types of loans remained low, and lending standards remained tight in February and March. In the Eleventh District (Dallas), financial firms reported a slight improvement in overall loan demand. National banks reported some pickup in commercial and industrial loan demand, with increased corporate activity, while regional banks noted that loan demand remains flat.
    • In the Fifth District (Richmond), the labor markets strengthened across most sectors, with the exception of construction and retail. In the Sixth District (Atlanta), labor markets continued to recover gradually across the region, and business contacts indicated that their hiring plans for the year are to keep employment levels unchanged or to increase them slightly. In the Eleventh District (Dallas), there were reports of increased hiring activity compared with the previous reporting period.
  3. Compare and contrast the energy and transportation sectors of two districts.
    • In the Fourth District (Cleveland), reports indicate that oil and gas output from conventional wells was fairly steady during the past six weeks, with little change expected in the near term. Spot prices for natural gas were either steady or trending down. Coal production was stable to moderately lower since the last report, with little change anticipated in the near term and coal prices held steady. While in the Sixth District (Atlanta), regional crude oil inventories continued to rise in February and March as the industry builds stocks in anticipation of the summer driving season.
    • Though the number of rigs operating in the Gulf of Mexico is still only about half of pre–oil spill, deep water drilling permits were issued in late February for the first time since the Gulf spill last April. In the transportation sector, Fourth District freight transport executives reported that shipping volume rose from early February through mid-March, after a greater-than-expected seasonal decline in January. Transportation contacts in the Sixth District (Atlanta), noted that shipments and tonnage continued to experience modest increases since the last report.
  4. Why would late-winter tourism activity in the Ninth and Tenth Districts (Minneapolis and Kansas City) increase from a year ago?
    • A chamber of commerce representative in the Ninth District reported that late-winter snowmobiling and cross country skiing were strong in northwestern Wisconsin, and a Minnesota ski resort noted that February and March activity was up about 8 percent from last year. Several Montana ski areas extended their seasons due to deep snowpack. With some improvement in labor market conditions, consumers may be more willing to increase their discretionary spending.
  5. What does the Beige Book summary say about automobile sales?
    • Automobile sales rose in most Districts. Dallas noted higher foot traffic at auto dealers, and Cleveland, Atlanta, and San Francisco indicated that improved availability of credit helped to boost car sales. In the Richmond District, however, vehicle sales were generally unchanged or sluggish.
  6. In the Beige Book report, what sector has shown a strong improvement across Districts and could have a positive impact on the labor sector?
    • Manufacturing led economic improvements in this Beige Book, with every district citing examples of steady improvements, often with reports of increased hiring. Most districts reported that labor market conditions were generally stronger than in their last reports.
  7. What was the overall economic summary for the Fourth District?
    • In the Fourth District (Cleveland), economic activity continued to expand modestly. Manufacturers reported some improvement in new orders and production. Information received from retailers and auto dealers was generally positive. Freight transport volume increased, and energy producers noted little change in output. New home construction remained sluggish, while nonresidential building showed some pickup in activity. The demand for business and consumer credit rose slightly. Payroll increases were limited to the manufacturing and retail sectors, and staffing firm representatives noted moderate growth in the number of new job openings, with vacancies concentrated in health care, professional business services, and energy.
  8. The April 2011 Beige Book says that most non-financial service firms reported expansion. Why would the First District (Boston) and Ninth District (Minneapolis) cite a stronger demand for advertising, consulting, and marketing services, and several districts report a higher demand for seasonal accounting services?
    • As the impact of the recession decreases, businesses may be gearing up to capture consumers’ dollars through increased advertising and marketing efforts. Businesses may also be using consultants to see where it is feasible to cut back to increase their profit margins or to determine their return on investment for the adverting and marketing services they use. Seasonal accounting services are in high demand because it’s tax season.
  9. What did contacts in the Fourth District (Cleveland) say about capacity utilization rates in the manufacturing sector?
    • Capacity utilization rates, which are the ratios between a business' actual production and its potential output, continue to trend higher. Inventories are balanced with incoming orders.
  10. Compare loan demand in the April Beige Book reports for 2010 and 2011.
    • In the April 2011 Beige Book, most Districts cited loan demand as either unchanged or slightly improved since the previous report, although many of the Districts citing improvements also noted weak demand in some market segments. Cleveland reported that business lending was strongest in healthcare and energy, and consumer credit demand showed some improvement, especially for vehicle purchases and home equity lines of credit. Several districts reported that credit standards were unchanged or slightly tighter and that competition for quality loans was intense.
    • This contrasts with the April 2010 Beige Book, in which loan demand was weaker across categories in Atlanta, St. Louis, and Kansas City, stabilizing in Dallas, and flat at low levels in San Francisco. Demand for consumer credit decreased in New York and increased slightly in Philadelphia. Most banks in Cleveland reported weak consumer loan demand, although a few contacts saw a slight increase due to seasonal factors.