As we've said before, to figure out what the Federal Reserve means when it reports about how the economy is doing and whether policymakers think it's doing better or worse, you need to carefully compare the central bank's latest words to what it has said in preceding months.
Today's "beige book" report from the Fed signals that the evidence the central bank is collecting points to some more improvement. In its opening paragraph, to which we've added some boldface for emphasis, the Fed says:
"Contact reports from the twelve Federal Reserve Districts suggest that national economic activity expanded at a modest to moderate pace during the reporting period of late November through the end of December. Seven Districts characterized growth as modest; of the remaining five, New York and Chicago noted a pickup in the pace of growth, Dallas and San Francisco reported moderate growth, and Richmond indicated that activity flattened or improved slightly. Compared with prior summaries, the reports on balance suggest ongoing improvement in economic conditions in recent months, with most Districts highlighting more favorable conditions than identified in reports from the late spring through early fall."
On Nov. 20, the Fed's beige book reported that:
"Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts except St. Louis, which reported a decline in economic activity. District reports indicated that consumer spending rose modestly during the reporting period. ... Business service activity was flat to higher since the previous report. ..."
And on Oct. 19, the Fed wrote that:
"Reports from the twelve Federal Reserve Districts indicate that overall economic activity continued to expand in September, although many Districts described the pace of growth as 'modest' or 'slight' and contacts generally noted weaker or less certain outlooks for business conditions. ..."
Beige books are produced eight times a year. They get their name from the color of their covers.