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 September, 2011

  1. Characterize the overall national economic activity reported by the 12 Federal Reserve districts in the September 7,2011, Beige Book report. Can we go
    • Reports from the 12 Federal Reserve districts indicated that economic activity continued to expand at a modest pace, though some districts noted mixed or weakening activity. Several of them also indicated that recent stock market volatility and increased economic uncertainty had led many contacts to downgrade or become more cautious about their near-term outlooks. Consumer spending increased slightly in most districts since the last survey, but non-auto retail sales were flat or down in several districts. Although poor weather dampened growth in some areas, tourist activity remained solid in most districts. Of the five districts reporting on transportation, three said conditions were mostly positive. Manufacturing conditions were mixed, and most districts characterized commercial real estate and construction activity as weak or little changed, but there were some improvements in several areas.
  2. The weather wreaked havoc on the agricultural sector across several districts. Describe the weather extremes.
    • Weather extremes in several districts interfered with agricultural activity. Hot dry weather stressed crops and livestock in the Seventh (Chicago), Eighth (St. Louis), Tenth (Kansas City) and Eleventh (Dallas) districts, with poor pasture conditions hastening the selling off of herds in the Kansas City and Dallas districts. Hurricane Irene caused extensive damage to field crops not yet harvested in North Carolina.
  3. Agriculture is one sector that was affected by Hurricane Irene. What is another?
    • Tourism in Long Island and the Jersey Shore areas of the Second District (New York) as well as coastal areas of the Fifth District (Richmond) were heavily affected by hurricane evacuations in late August.
  4. What does the Beige Book report say about capacity utilization in the manufacturing sector? What are capacity utilization and supply-chain normalization?
    • Capacity utilization in the steel industry remained at record high levels in the Seventh District (Chicago), and a tire manufacturer in the Sixth District (Atlanta) noted particular pressure in meeting a recent surge in new orders due to supply-chain normalization after the Japan disaster. The capacity-utilization rate is the ratio between what is actually produced by a business and that business’ potential output. A supply chain is composed of elements that are linked by the movement of products; it begins and ends with a customer. In this case, the supply chain returned to normal after being disrupted by the Japan disaster.
  5. Several districts reported a shortage of skilled workers such as engineers, mechanics, and software engineers. What may be causing this shortage?
    • There could be a mismatch between the skills and education of jobseekers and the needs of employers who are looking for engineers, mechanics, and software engineers. Job seekers may need to gain new skills and knowledge in order to be considered qualified for the positions.
  6. Compare the consumer spending/retail sectors for two districts.
    • Retailers in the Fourth District (Cleveland) reported that sales for early July through mid-August were on or ahead of schedule, and that transactions increased in single digits relative to year-ago levels. Many contacts said that sales were rising for necessities and discretionary items, especially for innovative products. In contrast, Third District (Philadelphia) retailers reported that sales were generally flat to down compared with a year earlier, although results varied among individual stores across the District. Heavy promotions and markdowns were used to counter what one retail manager described as “not a great August.”
  7. Districts reporting on auto sales noted increases, despite lingering supply disruptions of Japanese nameplates. What could have caused these shortages?
    • Japan’s earthquake in March had an impact on auto production in the United States because it caused a lack of key parts produced in Japan (supply-chain disruptions). Contacts in the Eleventh District (Dallas) believed the problems with supply from Japanese manufacturers should be resolved by the end of September.
  8. What was the overall economic summary for the Fourth District?
    • The economy grew at a slow pace over the six weeks since the last Beige Book report. Many contacts downgraded their near-term outlooks. Manufacturers reported stable production, but a decline in new orders and backlogs. New home construction remained slow. Demand for business credit rose slightly. Payrolls in manufacturing and energy increased modestly.
  9. What expansion in the Fourth District’s energy sector was reported in the September 2011 Beige Book?
    • Conventional oil and natural gas drilling and production were stable since the last Beige Book in June. But activity in Marcellus and Utica shale continued to expand. Shale gas production in Pennsylvania grew almost 60 percent in the first six months of 2011 relative to the previous six-month period.
  10. Compare Fourth District (Cleveland) loan demand as reported in the September 2011 Beige Book with that reported for September 2010.
    • In the September 2011 Beige Book report, demand for business loans showed a modest improvement, with requests coming from a broad range of industries. Reports indicated downward pressure on interest rates for business credit. Applications for residential mortgages picked up, with bankers citing falling interest rates as the reason. But in September 2010, the market for business lending remained soft, with bankers characterizing demand for new commercial and industrial loans as steady or slowly improving.