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What is the Beige Book?

Thursday, April 25, 2019 | MarketBeat Staff
What is the Beige Book?

Summary - One of the most commonly referenced economic indicators is the Beige Book. This book is a compilation of 12 different Beige Books composed by the Federal Reserve banks. Officially titled “The Summary of Commentary on Current Economic Conditions by Federal Reserve District”, the Beige Book provides direction to the Federal Reserve with regard to United States monetary policy.

The Beige Book takes a broad look at economic activity in the economy. Because each region publishes its own chapter, each chapter has a regional point-of-view that makes them unique from other economic indicators. In compiling the Beige Book, regional banks conduct interviews and survey local business leaders for information about critical predictors of economic activity including industrial production, financial services, and technology. These chapters are written as anecdotal reports which is both a strength, because it is easy to digest, and a weakness – because it is not based on scientific methodology.

Among economic indicators, the Beige Book is considered both a leading indicator and a lagging indicator. It is a leading indicator because the regional banks are making inferences and conclusions about what the data they have received means for their regional economies. However, because the data that is reported to the regional banks is, in many cases, several weeks or even months old some analysts view it as a lagging indicator (i.e. the data reflects economic activity that has already occurred).

The Beige Book is released to the Federal Reserve Board two weeks before the Federal Open Market Committee (FOMC) meetings which are held eight times every year. The release of the report can be delayed by an event such as the government shutdown.

The significance of the Beige Book is primarily in its effect on monetary policy. If the regional banks are reporting slowing economic activity, it can prompt the Federal Reserve to take steps that will make monetary policy more expansive. Conversely, if the FOMC members report that economic growth is robust, it may spark concerns about inflation which may lead to a tightening of the money supply and an increase in the federal funds rate both of which can have an effect on business and consumer borrowing and spending.


Eight times a year, the stock market and financial media closely watch the meeting of the Federal Reserve board to gain insight as to the direction of our country’s monetary policy. In our information age, these meetings have become a mere formality as most of the mystery regarding what data the Federal Reserve board will use to make their decisions is public knowledge well in advance of the meeting. One reason for this is the existence of the Beige Book, a document that is released two weeks prior to the Federal Open Market Committee (FOMC) meeting. The Beige Book is one of a host of economic indicators that the Federal Reserve uses to make decisions regarding the direction of the all-important federal funds rate (i.e. interest rates) and in recent years the extent and duration of quantitative easing – the generation of money into our nation’s money supply.

In this article, we’ll take a detailed look at the Beige Book. We’ll define what the Beige Book is and the methodology that is used to create it. We’ll look at how the FOMC members use the data contained in the Beige Book as guidance for their monetary policy decisions. We’ll also look at both the strengths and the weaknesses of the Beige Book.

What is the Beige Book?

The Beige Book is a leading economic indicator of the United States economy. The Beige Book, formally titled “The Summary of Commentary on Current Economic Conditions by Federal Reserve District”, is published eight times a year. The Beige Book that is typically referred to in the financial media is actually a compilation of 12 different Beige Books.

Each of the Federal Reserve regions (i.e. the FOMC members) writes a chapter of the Beige Book for their own region (the St. Louis Fed, the Philadelphia Fed, the Chicago Fed, etc.). Each of these chapters is compiled into the larger Beige Book that is released prior to the Federal Reserve Board meeting. In addition to the twelve chapters that come from each of the FOMC members, the Beige Book includes a national/executive summary that is written by one member of the Federal Reserve Board on a rotating basis. For example, the summary for the most recent report as of this writing was prepared by the Chicago Fed.

The Beige book’s publication coincides with the yearly meetings of the Federal Open Market Committee (FOMC). The beige book is published two weeks prior to the FOMC meeting.

The beige book uses data that is compiled from local sources regarding the economic activity for that region. Some of this data includes the unemployment rate, the growth or contraction of prices and wages, retail and e-commerce sales as well as manufacturing output. The report is written in a conversational tone and provides the particular FOMC member’s own interpretation and analysis of what the data means for the broader economy.

This forward-looking language gives credence for some analysts to consider the Beige Book to be a leading economic indicator. Other analysts see it as a lagging indicator since the data that the regional banks use in the creation of their chapters is based on information that is already evident in the economy.

The Beige Book gets its name from its beige cover. It is one of three reports that are prepared for the FOMC meeting. The other two, the Greenbook and the Bluebook, are also given a name based on their covers. The Greenbook is formally titled the “Current Economic and Financial Conditions”, and the Bluebook is officially called “Monetary Policy Alternatives”.

How is the Beige Book assembled?

Each of the 12 Fed districts reports on the overall economic health of their region by covering the general pace of business activity in their region, an interpretation of how fast the economy is growing or contracting and hiring activity. Included in each region’s report will be information about events such as natural disasters, port closures, or strikes that may affect their regional economy.

To get insight into what is going on at the grassroots level, the banks will interview local business leaders including branch directors, business contacts, and economists. These respondents provide insight into which sectors are growing or declining. The report covers the same sectors that are important to the stock market (technology, manufacturing, financial services, tourism, real estate, and agriculture).

How does the Beige Book influence monetary policy?

Since the purpose of the FOMC meetings is to address the nation's monetary policy, and the Beige Book is distributed to FOMC members two weeks prior to the meeting, it's fair to ask what effect the Beige Book has on monetary policy?

If the regional banks are reporting that the economy is slowing than the FOMC may consider a more expansionary monetary policy to increase the money supply. This may take the form of lowering interest rates to encourage investment from businesses and consumer spending. It may also increase the nation’s money supply such as the “quantitative easing” program that has become a part of our national financial language since the financial crisis and ensuing recession of 2008.

In a similar way, if the economic reports are encouraging, it could be a signal that inflation has exceeded what the Federal Reserve considers its ideal growth rate of 2-3%. If that is the case, the Federal Reserve board may take steps to tighten the nation’s monetary policy as a way of preventing the economy from overheating. This could take the form of raising interest rates and reducing the money supply. This would have the effect of reducing borrowing by businesses and consumers.

In recent years, the United States has been in a nearly unprecedented rate of expansion in which the economy is growing but at a moderate pace that is neither too fast nor too slow. While, in general, this modest “Goldilocks economy” has led to interest rates being neither raised nor lowered, the Beige Book did reveal conflicting thoughts from some FOMC members regarding the rate of interest rate changes.

What are the strengths of the Beige Book?

  1. One of the primary strengths of the Beige Book is that it offers a regional point-of-view on business conditions, rather than looking at industry groups or sectors from a national perspective.
  2. A second strength is that it attempts to assign meaning to data rather than simply reporting what the numbers say.
  3. It compiles the reports, or chapters, from twelve distinct Federal Reserve banks into one report.
  4. It provides a first-person view of regional or local business conditions by capturing the perspective of business owners, economists and other influencers.
  5. Some, but not all, of the regional reports will include information about the service industries which comprise a significant component of real gross domestic product but is not extensively covered by other economic indicators.

What are the limitations of the Beige Book?

  1. The conclusions and inferences made by the different FOMC member banks are, for the most part, anecdotal in nature. Scientific methodology is not used to create the surveys that go into the report.
  2. Although intended to be written in a conversational fashion, the Beige Book does contain measured language that provide a hedge for any inferences made.
  3. Because the individual reports are regional in nature, it is difficult to draw national conclusions about specific industry sectors.
  4. The content of each report is not standardized. In fact, the economic sectors touched on in each report are included at the discretion of each region. For example, one region may choose to report on residential real estate or manufacturing while another may choose not to touch on those areas.

The final word on the Beige Book

The Beige Book, officially titled “The Summary of Commentary on Current Economic Conditions by Federal Reserve District” is an economic indicator that is published eight times a year and helps guide the Federal Open Market Committee (FOMC) on the monetary policy of the United States.

The Beige Book includes qualitative information that is reported to our nation’s twelve regional banks. These banks take this data and compile their individual Beige Books which are compiled and presented as the Beige Book which is commonly referred to in the financial press.

The Beige Book takes a regional view of economic conditions most notably regarding employment conditions (including the unemployment rate), business inventories and other business conditions that may affect economic growth. Although the information that is reported to the regional banks reflects economic activity that has already occurred, the conclusions drawn by the regional banks are forward-looking and closely watched by investors and analysts who try to predict how the release of the FOMC minutes will affect the stock market and the broader economy.

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