Forex Educational Library

FED Beige Book – November 2017

Beige Book November

The Beige Book is a publication of the Federal Reserve system where the economic conditions of the twelve federal districts of the reserve are published monthly. This report characterises the regional economic conditions and shows how the projections by zones are based on vast information collected by the authorities of each district. Analysing each district, we can have a clearer picture of the conditions in which the main economic zones of the United States are located, which make it possible to make projections about the possible votes that the federated presidents will hold.

The qualitative nature of the Beige Book creates opportunities to analyse the dynamics of each region and identify possible trends in the national economy of the United States that may not be so clear in the monetary policy reports. That is, by analysing the report of each district in the United States, analysts could predict how the national economy will behave by uniting individual trends and their weight in the economy.


The information collected in the Beige Book is complementary to other reports issued by analysts and other central bank entities and can be used by any investor to make decisions. In addition, Beige Book publications often allow the investor to summarise and show what the central bank’s efforts are doing to manage the economy.

The publication of the Beige Book last September showed a moderate expansion of the economy in general in the twelve districts of the Federal Reserve between July and August. In most districts, consumer spending increased, especially in retail sales and tourism, but with mixed results in vehicle consumption; whilst manufacturing activity expanded modestly.

As for housing and commercial construction, they increased slightly in the twelve districts. In the real estate market, there was a low inventory of houses for sale which affected this market nationwide. Between July and August, positive signs were seen in the energy and natural resources sector before it was affected by hurricanes.

In the labour market, new jobs and salaries increased slightly in most districts. Some analysts indicated that the market was narrow, so many companies had difficulty finding qualified workers in the respective tasks they needed. Some companies from different industries pointed out that they had to lose new business agreements due to the lack of labour. Despite this, most districts reported few upward wage pressures with few exceptions. Added to these problems in the workforce, some inputs in production materials rose in price such as steel, wood and the cost of transport.

In summary, prices increased slightly at the national level. The inputs and material costs rose in contrast to energy prices and agriculture where the results were mixed, showing a weak upward trend.  The real estate market rose due to low supply which led to new equilibria in this market.

Looking at each district of the Beige Book report it can be seen that:

Boston: Reports indicate that revenues in manufacturing and retail sales continued to expand modestly. Prices were stable, and wages increased very little. As at the national level, the housing market did not show good dynamism due to restrictions in inventories. Analysts continued to observe a positive outlook.

New York: The economy moderately increased its growth, and the labour market remained narrow with a limited job offer. Regarding inputs, prices rose moderately. The housing market, as in Boston, did not have a good dynamic, but house prices rose.

Philadelphia: Modest economic growth with some signs of improvement in non-automotive retail sales, housing construction, and commercial stores. In general, new jobs and wages increased, and inflation rose, but only slightly.

Cleveland: Good dynamics in economic activity. Increase in wages. As in other states, the vehicle industry had a negative trend.

Richmond: The economy expanded modestly. Worrying signs were observed in consumer spending and the housing market where no positive trend was seen. Prices increased slightly.

Atlanta: Economic activity improved slightly. Salaries remain stable, while prices increased slightly.

Chicago: Its economic growth slowed down. Employment, spending on consumption, spending on business and manufacturing grew at moderate rates. Salaries and prices increased slightly.

St. Louis: Improvement in economic activity. Analysts expect this trend to continue throughout 2017. Prices increased modestly. They even increased further for this period than in 2016.

Minneapolis: Activity grew modestly. Tourism boosted economic growth in this region. The construction sector also boosted the economy. Prices increased for wages and retail sales, but for other goods and inputs remained stable.

Kansas City: Economic activity increased slightly. Manufacturing and business services expanded slightly. The trend in prices continued to rise, but the trend is no longer so positive. Analysts expect prices to continue rising throughout 2017.

Dallas: As in the other regions, the economy grew moderately. Manufacturing and consumer spending drove growth, in addition to retail sales. Inflation accelerated in August. There is upward pressure on inputs. The price of housing remained stable. The sale of new homes remained stable without significant growth.

San Francisco: Economic activity expanded slightly. Inflation, in general, did not increase and the labour market, as in the rest of the country, suffered supply problems for which companies had problems finding workers. Growth in consumption and business services remained strong trends. Activity in the housing market remained strong.

As mentioned earlier, these reports for each district of the Federal Reserve are made monthly. The conclusions of the November report will be presented in the next part of the article.

Economic activity continued with moderate growth, as indicated in the September Beige Book and the monetary policy reports of the central bank. Reports of consumer spending in retailers and the automotive industry showed mixed behaviour with little growth. Many districts showed growth in the transport sector, and the construction and housing sales sector showed limited growth due to supply restrictions. One aspect that differs from the September report is the more substantial growth in the number of jobs and salaries, although companies continue to complain about the lack of skilled labour, so the market is very narrow.

Most districts reported moderate growth in sales prices and slight increases in input costs, particularly construction materials. Also, an increase in real estate prices added to those in transport. The only sector where the results were mixed was in the agriculture sector where the price trend is not clear. In general, there is still a positive trend in the growth and prices of most districts.

Next, the situation of each district will be explained in the report issued in November.

Boston: Continued growth in economic activity thanks to manufacturing and retail sales. The labour market remains narrow and with few increases in wages. The change in prices is almost nil. In the real estate market, the situation is not very positive given the lack of inventories of houses for sale.

New York: Economic activity expanded moderately with a narrow labour market. The prices of the inputs grew slightly as well as the sale prices. In other sectors such as hotels, prices have remained stable, showing mixed results in this district. The real estate market has retreated a bit, but prices continue to rise.

Philadelphia: Economic growth was driven by manufacturing, non-financial services, and tourism. Commercial and residential construction increased slightly. The downside is the decline in retail sales. In general, wages and prices increased while the number of new jobs was slightly above the previous report’s data

Cleveland: The economy showed a weak performance although production is a bit above the data of the previous report. Due to pressures in the markets, inputs, wages, and prices of sales of goods increased during this period. We observe a real estate market with good dynamics showing better data than in 2016.

Richmond: The economy continued to grow at moderate rates driven by manufacturing and the transportation sector. In this district, the same problems arose as in others with the real estate market as it grew little due to the lack of suppliers. The price growth was too slight.

Atlanta: Economic conditions improved slightly compared to the previous report. The labour market remained very tight which led to a slight increase in wages and a lack of labour supply. The non-labour costs for the companies remained unchanged. Retail sales increased in the district. The sector that contributed most to growth was tourism. The sale of houses decreased, but not their price.

Chicago: Economic activity grew slightly. Manufacturing and new jobs grew at modest rates, but at higher rates than spending on consumption and spending on business. The real estate activity grew very little. Salaries and prices grew very little as in most districts.

St. Louis: The economy improved compared to the previous report. The labour market is still tight, bringing wages up. The outlook is optimistic for analysts in this district, which is a better outlook than for the same period in 2016. Prices continued to grow, but their increase was slow during the last quarter of the year. The behaviour of real estate stagnated compared to the previous report.

Minneapolis: The growth was quite modest. New jobs grew, and so did wages. Manufacturing is one of the sectors with the best projections. The real estate sector performed well. Prices increased slightly in construction materials and prices of fuels sold at retail.

Kansas City: Economic growth was moderate. The manufacturing and business services grew moderately following a good dynamic throughout the year. The consumption expenditure was very flat. Sales prices increased slightly, as did inflation. In general, all sectors showed an increase in prices.

Dallas: The economy grew moderately, and business returned to normal after Hurricane Harvey. Manufacturing and non-financial services continued with good behaviours expanding. Retail sales remained strong. The lack of skilled labour for new jobs is evident, which drives wages up. In general, prices increased in most sectors.

San Francisco: The economy continued to expand at moderate rates. Retail sales grew at moderate rates. Activity in the real estate market remained robust as well as commercial activity. The negative aspect was the behaviour of inflation that was flat without large increases.

Analysing the last report of November and the one of September, we can conclude that the economy of the United States in 2017, as it indicates this monetary policy report, has had a good dynamic in its growth, labour market and in its exports. But also, as you can see, each district shows that the increase in monthly inflation in most places has been low, so this affected the decision of the bank on whether it was convenient to raise interest rates or leave them unchanged. At the end of the year, it is acknowledged that the FED has raised the rate three times in the year, but there were certain doubts in each meeting about what the bank was going to carry out.

Despite the overall good performance of the economy, as could be seen by breaking down each district, it is important to highlight how prices have had downward pressures, which does not agree with the projections that were made at the beginning of the year. That, added to a labour market that performed well, with a good dynamic, and low rates of unemployment, but it is increasingly difficult for companies to find available skilled labour, and this has led to an increase in wages in almost all districts.

In conclusion, the United States and its districts are in a boom phase with prosperous sectors such as manufacturing, retail sales, tourism among others that have boosted economic growth. Analysing the main districts, the main problem is inflation, which does not grow at high rates. In addition to the real estate market, which, even though its prices rise in most places, its dynamics are quite limited due to the low supply of housing for sale; which has led to this price increase.



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