Beige Book Report Summarizes District Economic Activity
The Federal Reserve produces the Summary of Commentary on Current Economic Conditions, otherwise known as the Beige Book. The Fed collects anecdotal reports from Fed bank presidents, key businesses, economists, and market experts and packages the information in a comprehensive summary of the 12 district reports. Each Beige Book is prepared by a designated Federal Reserve Bank on a rotating basis and is released eight times a year.
The 12 Federal Reserve District Banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
The Beige Book is released to the members of the Federal Open Market Committee (FOMC) before each of its meetings on interest rates, so it’s an important source of information for the committee members when they’re deciding in what direction they’ll vote to take interest rates.
Traders look for any mention of labor shortages and wage pressures in the Beige Book. If any such trends are mentioned, bonds may sell off, as rising wage pressures are taken as a sign of building inflation in the pipeline.
Here’s a good habit to get into so you can capitalize on knowledge from one area of the market as you apply it to another: After the initial headlines and market reactions, you should read through the report on the Internet. The Beige Book usually is released in the afternoon, one or two hours before the stock market closes. The overall trend of all markets can reverse late in the day when the data in the report surprise traders.