This book is produced roughly two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Fed district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts. Why Investors Care
Highlights
In information gathered on or before January 8, the Federal Reserve Beige Book indicated that the economy remains on a moderate growth path and that price increases also have been moderate. However, the Federal Reserve Districts reported that labor market conditions are "tightening." Despite this tightening, wage gains have been moderate except in certain business lines.
Gains in sales by retailers were described "modest" - reflecting soft sales for motor vehicles and for apparel as winter apparel sales were hurt by unseasonably warm weather. Manufacturing continued to expand in most districts, although strength varied by district. However, manufacturers that support residential construction remain weak. Inventories are seen as balanced. The services sector is strong - especially technical services.
Housing was reported to continue to decline across nearly all Fed districts. High inventories of unsold homes continued to push housing construction down. However, some districts have seen a pick up in multifamily construction. Home prices were mixed with some districts reporting higher prices, others reporting lower, and some a mix of the two. Nonresidential construction continued to be strong.
Prices for energy and materials have eased in general. While retail prices have been either mixed or merely "edging up." In general, the Fed reported prices with adjectives such as "modest," "steady," "easing," or "moderating." Inflation concerns now mainly seem to come from the labor market.
Overall, the latest Beige Book does little to change the view of the economy - especially from the Fed's view. It is in line with their earlier Green Book forecasts and the earlier problem areas remain. While it is good that prices are reported as moderate, the Fed will still be concerned about the tight labor market. This report supports the view that the Fed will remain on hold for the new future.
The next FOMC meeting is scheduled for January 30 and 31 with the FOMC statement due out January 31.
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