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 February 2012

  1. Characterize the overall national economic activity reported by the 12 Federal Reserve districts in the February 2012, Beige Book report.
    • Reports from the 12 Federal Reserve districts suggest that overall economic activity continued to increase at a modest to moderate pace in January and early February. Economic activity expanded at a moderate pace in the Fourth (Cleveland), Seventh (Chicago), Tenth (Kansas City), Eleventh (Dallas), and Twelfth (San Francisco) districts. The Eighth District (St. Louis) experienced modest growth, and the Ninth District (Minneapolis) said the pace of growth was firm. Manufacturing continued to expand steadily across the nation, with increases in new orders, shipments, and production; several districts indicated gains in capital spending, especially in auto-related industries. Consumer spending was positive except for sales of seasonal items. Tourism was strong in some districts but declining in others. Hiring increased slightly across several districts, and contacts in a variety of industries faced difficulties finding skilled workers.
  2. Contacts in the First District (Boston) reported improving conditions in the manufacturing sector: increased investment, greater ease in finding financing, and rising employment. But there was also a quite remarkable finding from the First District’s manufacturing sector. Explain.
    • Remarkably, almost all of the First District contacts said that they have acquired at least one company over the last six months.
  3. Explain how the mild winter weather in the Third District (Philadelphia) may have increased the pace of overall business activity.
    • Manufacturing activity has grown further, with more broad sectors contributing to the gain. Retail sales have maintained steady, year-over-year increases. Motor vehicle dealers have experienced unseasonably strong sales growth overall. New home construction started the year strong, thanks to the warm weather, and commercial real estate contacts continued to report steadily improving markets for retail, office, and industrial space.
  4. Contacts in the Fifth District (Richmond) suggested that the real estate sector had moved beyond the “bottoming-out phase.” What are some of the positive indicators that were mentioned?
    • Some contacts reported reduced inventory of new and existing homes in the D.C. and Richmond areas, and some builders are beginning to sell and build again. A source in North Carolina said that one housing development was successful because of a rent-to-own plan and that construction was starting up in the Research Triangle area.
  5. The mild winter weather in many districts was good news for some sectors and bad news for others. Explain.
    • Consumer spending at Broadway theaters in the Second District (New York) reported that revenues and attendance surged more than 30 percent above year-earlier levels, partly because of unseasonably mild weather. Contacts in the First District (Boston) report that exceptionally mild winter weather may have prompted spring sales activity in real estate to begin earlier than usual. However, mild weather hampered retail sales of winter apparel and other seasonal items in the First (Boston), Second (New York), Third (Philadelphia), Fourth (Cleveland), Seventh (Chicago), and Eleventh (Dallas) districts. And the Ninth (Minneapolis) and Tenth (Kansas City) districts reported a decrease in tourism that was attributed primarily to below-average snowfall. Within the Ninth District (Minneapolis), drought conditions spread in Minnesota, the Dakotas, and portions of Wisconsin.
  6. Some districts reported positive conditions in the energy and mining sectors, while other districts reported flat conditions. Describe some of those conditions.
    • The Tenth (Kansas City), Eleventh (Dallas), and Twelfth (San Francisco) districts noted increased activity in crude oil extraction. Similarly, the Seventh (Chicago) and Ninth (Minneapolis) districts reported robust activity in energy and mining; and in the Eleventh District (Dallas), energy-related service firms reported very strong demand. Mining for various metals also increased in the Twelfth District (San Francisco). The Fourth District (Cleveland) reported that conventional oil and natural gas drilling and production were flat, and San Francisco observed lower demand for natural gas.
  7. Compare real estate and construction conditions in this Beige Book report to conditions in 2011.
    • Residential real estate activity increased modestly in most districts, with the First (Boston), Fourth (Cleveland), Fifth (Richmond), Sixth (Atlanta), Tenth (Kansas City), and Eleventh (Dallas) districts reporting growth in home sales and the Second District (New York) noting steady to slightly softer home sales. Single-family residential construction was weak in the Seventh District (Chicago) and declined in the Eighth District (St. Louis). The Fourth District (Cleveland) noted that construction growth has abated somewhat since the year-end uptick. The Ninth District (Minneapolis) noted increased applications for single-family building permits. In March 2011, however, activity in residential real estate varied, but overall sales and construction remained at low levels across all Districts. The Fifth (Richmond), Sixth (Atlanta), and (Seventh) Chicago districts reported a slight improvement in the level of recent activity, while the First District (Boston) noted that activity was mixed across New England. Construction activity was described as flat or down by the Fourth (Cleveland), Sixth (Atlanta), Ninth (Minneapolis), and Tenth (Kansas City).
  8. Discuss some of the unusual indicators that contacts in the Ninth District (Minneapolis) used to gauge consumer spending.
    • Many of the district’s auto repair shops reported a decrease in business, caused by fewer snow- and ice- related accidents. Snowmobile dealerships reported a sharp drop in sales from a year earlier, because the lack of snow in Minnesota and Wisconsin stymied snowmobiling and cross-country skiing.
  9. What was the overall economic summary for the Fourth District (Cleveland)?
    • Economic activity in the Fourth District (Cleveland) has grown at a moderate pace since the last Beige Book report. Manufacturers reported improved business conditions and increasing activity in shale gas drilling and production. Demand for business and consumer credit improved slightly, as did activity in residential and nonresidential construction. Retail sales were mixed, while auto sales decreased slightly, consistent with seasonal trends.
  10. What does the Beige Book report say about capacity utilization in the Fourth District (Cleveland) manufacturing sector?
    • Capacity utilization remains below normal for the majority of contacts, who expect little change in the near term. The capacity utilization rate is the ratio between what is actually produced by a business and the potential output of that business.