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 January, 2011
- Characterize the overall national economic activity reported by the 12 Federal Reserve Districts in the January 12, 2011, Beige Book.
- Reports from the 12 districts suggest that economic activity continued to expand from November through December 2010. They show that conditions were improving in the Boston, New York, Philadelphia, and Richmond districts. Activity increased modestly to moderately in the Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and Dallas districts. Manufacturing continued to improve in all districts, and retailers indicated that holiday-season sales were higher in 2010 than in 2009. In contrast, residential real estate markets remained weak in all districts.
- Pick three districts from the most recent Beige Book, and compare the commercial real estate, retail sales/consumer spending, and agriculture sectors across these districts. What does the comparison tell you about each sector?
- Nonresidential construction in the Sixth District (Atlanta) remained at low levels through the end of 2010, and many contacts indicated that they expect the commercial market to remain constrained in 2011. Contacts in the Eighth District (St. Louis) reported generally sluggish commercial real estate conditions, but are looking forward to improvements in some areas, such as Louisville. Conditions in commercial real estate markets in the Twelfth District (San Francisco) continued to be weak on balance, but investor demand for office buildings with high occupancy boosted market values in San Francisco and other major commercial markets in the district. Retail spending told a different story. Retailers in the Sixth District (Atlanta) noted that holiday sales were above expectations, and in the Eighth District (St. Louis), holiday sales increased compared with the same period the year before. Retailers in both traditional department stores and smaller specialty stores in the Twelfth District (San Francisco) reported that holiday sales exceeded expectations.
- In the agriculture sector, the Sixth District (Atlanta), which includes most of the southeast, continued to experience varying degrees of prolonged drought. Reports indicated that both the lack of rain and the colder-than-average temperatures have presented challenges to Florida citrus growers. But in the Eighth District (St. Louis), cotton production was strong, increasing 75 percent from 2009, and coal production rose 2 percent during the same period. In the Twelfth District (San Francisco), orders and sales remained robust for a variety of crop and livestock products, especially cotton and cattle.
- Compare and contrast the prices/costs/wages of two districts.
- In the Third District (Philadelphia), businesses reported no significant change in salaries and wages, and in the Ninth District (Minneapolis), wage increases remained subdued. But there were positive signs from a Minnesota all-terrain-vehicle powertrain manufacturer that gave out bonuses for the first time in several years, following strong 2010 performance. In the Third District (Philadelphia), manufacturers reported rising input costs for food products, chemicals, petroleum products, metals, and electrical equipment, and said they expect more widespread price increases for finished goods in 2011. In contrast, price increases in the Ninth District (Minneapolis) were modest, but Minnesota gas prices in December were up 20 cents per gallon compared with the previous month.
- Homebuilders and residential real estate agents in the Third District (Philadelphia) reported the usual seasonal lull in construction and sales. In such a depressed market, why would there be an increase in rentals of single-family homes?
- An increase in single-family home rentals could be attributed to owners who have relocated but have been unable to sell their homes at their asking price and are renting them out instead; buyers unable to obtain mortgages; and tighter credit qualifications for apartment renters.
- If economic activity improved across Federal Reserve Districts, why isn't new residential construction making a more robust recovery?
- The slump in residential construction has been attributed to concerns about the pace of economic recovery, especially in employment. High inventories of existing homes, resulting partly from foreclosures, have also dampened the pace. Potential homebuyers' difficulty in obtaining credit in Chicago, Atlanta, and Philadelphia also placed a constraint on demand.
- What does the December 2010 Beige Book summary say about manufacturing conditions?
- Manufacturing continued to recover across all districts, with contacts in Richmond, Chicago, and St. Louis identifying a strong flow of new orders. Production levels rose in the Cleveland, Atlanta, Chicago, and Kansas City districts. On the down side, however, the Boston, Atlanta, and Dallas districts reported that construction-related manufacturers continued to show considerable weakness.
- In the Beige Book report, what sectors are reported to have shown improvement?
- All Districts reported that manufacturing activity continued to recover and that holiday-season sales were higher for the retail sector in 2010 than in 2009. There was increased activity in the energy and nonfinancial-services sectors throughout several districts. Most districts reported that business contacts were positive, although still generally cautious, about their 2011 outlook.
- What was the overall economic summary for the Fourth District?
- Economic activity expanded modestly, with positive holiday reports from retailers and auto dealers. Construction remained sluggish, and consumer borrowing was weak, but demand for business loans began to increase. Staffing firms noted new job openings, and manufacturers reported rising payrolls.
- Compare the January 12, 2011, Beige Book report on conditions in the Fourth District's manufacturing sector with that of January 13, 2010.
- In 2009, the District's retailers reported that sales were flat or slightly stronger on a month-to-month basis, although they were still below year-earlier levels. In both 2009 and 2010, consumers focused on purchasing necessities rather than discretionary items and were price sensitive. For 2010, retailers expect sales growth through the holiday season to be conservative at best.
- What is capacity utilization and what does the Beige Book say about the rate of capacity utilization in the Fourth District (Cleveland)?
- The capacity utilization rate is the ratio between a business' actual production and its potential output. For example, a factory may be potentially able to produce 10,000 screws during three eight-hour shifts, but it actually produces only 8,100 screws. That factory's capacity utilization rate would be 81 percent. The Fourth District reported that capacity utilization continues to trend higher and is approaching what many respondents consider to be more normal rates.