Economic indicators are beacons that serve as a guide for investors; the Beige Book is one of the most important thereof. So what exactly is the Beige Book?
The Beige Book is often mentioned when analysts, business journalists or other investment experts report on the US economy. LGT’s analysts also pay a lot of attention to the Beige Book and the term regularly appears in the daily LGT Navigator. So what exactly is this seemingly universally accepted economic indicator and what is it based on? LGT Private Banking Europe’s Senior Investment Writer Alessandro Fezzi at takes a look behind the scenes and explains what you should know about it.
The Beige Book is an economic report published regularly by the Federal Reserve. It summarizes the economic conditions in the twelve districts of the Federal Reserve System. The Beige Book takes its name from the color of the cover of the once printed version of the report. Its official name, however, is Summary of Commentary on Current Economic Conditions. First compiled in 1970, the Beige Book was called the Red Book until 1983. The report has been publicly available since 1985.
The Federal Reserve System is composed of twelve regional offices: New York, Boston, Philadelphia, Richmond, Cleveland, Chicago, St. Louis, Dallas, Atlanta, Kansas City, Minneapolis and San Francisco. This geographical distribution covers all regions of the United States, thus ensuring a reliable assessment of the economic situation in the US.
The Beige Book is not a statistical report, but instead provides anecdotal evidence about the economic conditions in the various regions. To this end, Fed officials survey business representatives, economists and banks in their region. Their views are then incorporated into the economic report.
The Beige Book provides information on economic activity and sentiment.
The Beige Book thus provides information on economic activity and sentiment, as well as unemployment rates and hiring conditions. The report also contains other important information: it shows how pricing in manufacturing and commodity prices are developing. For the Fed, these are valuable indications with regard to inflation trends.
The members of the Federal Open Market Committee (FOMC) use this information together with statistical data to assess the latest economic developments.
The report is produced two weeks before each meeting of the Federal Open Market Committee, which convenes eight times a year. The Beige Book serves the FOMC as a basis for decision-making and for monetary and interest rate policy.
For traders and investors, the Beige Book provides insights into the current condition of the world’s largest economy on the one hand, and the Fed’s decision-making process on the other. This gives the capital markets and investors an indication of the direction that US monetary policy is going to take, which is important, especially in the run-up to an interest rate decision.
Header Visual © www.federalreserve.gov.
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