The FED's Beige Book

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Michael Höhne's picture
Michael Höhne
Status: Silver Member (Offline)
Joined: Nov 16 2008
Posts: 119
The FED's Beige Book

I stumbled across the following article today:

US Notenbank: Talsohle ist erreicht

Das Beige Book ist ein wichtiger Indikator für die US-Konjunktur. In der aktuellen Ausgabe macht die Notenbank Hoffnung: Der Abwärtstrend der wirtschaftlichen Entwicklung lässt nach. Auch wenn einige Regionen schon das Schlimmste überstanden haben, ist das Bild eher düster.

Sorry for the German, but that's the original source. Here's the translation:

FED: Bottom is reached

The Beige Book is an important indicator for the US economy. In its current release the FED raises hopes: the downward trend ceases. Though some regions have passed the worst, the overall picture remains gloomy.

Sounds good, so where is the beige book? It's here: http://www.federalreserve.gov/FOMC/BeigeBook/2009/20090610/default.htm

What is in the beige book (emphasis mine)?

Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating. Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year.

Manufacturing activity declined or remained at a low level across most Districts. However, several Districts also reported that the outlook by manufacturers has improved somewhat. Demand for nonfinancial services contracted across Districts reporting on this segment. Retail spending remained soft as consumers focused on purchasing less expensive necessities and shied away from buying luxury goods. New car purchases remained depressed, with several Districts indicating that tight credit conditions were hampering auto sales. Travel and tourism activity also declined. A number of Districts reported an uptick in home sales, and many said that new home construction appeared to have stabilized at very low levels. Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain. Most Districts reported that overall lending activity was stable or weak, but with mixed results across loan categories. Credit conditions remained stringent or tightened further. Energy activity continued to weaken across most Districts, and demand for natural resources remained depressed. Planting and growing conditions varied across Districts as did agricultural input costs.

Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Two Districts also mentioned employers' plans to scale back employee benefit programs. The Atlanta, Chicago, and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts. While manufacturing employment levels remained low, some Districts saw signs that job losses may be moderating. With few exceptions, Districts reported that prices at all stages of production were generally flat or falling. The notable exception to the downward pressure on prices was the widely-reported increase in oil prices.

This is the summary. The original document provides more details for different sectors and regions, but it doesn't get better.

To summarize:

  • Economic conditions remained weak or deteriorated further
  • No substantial increase in economic activity through the end of the year
  • Manufacturing activity declined or remained at a low level
  • Demand for nonfinancial services contracted across Districts
  • Retail spending remained soft
  • New car purchases remained depressed
  • Travel and tourism activity declined
  • New home construction appeared to have stabilized at very low levels
  • Vacancy rates for commercial properties were rising
  • Developers are finding financing for new commercial projects increasingly difficult to obtain
  • Overall lending activity was stable or weak
  • Credit conditions remained stringent or tightened further
  • Energy activity continued to weaken
  • Demand for natural resources remained depressed
  • Labor market conditions continued to be weak across the country
  • Plans to scale back employee benefit programs
  • Hiring freezes or outright job cuts
  • Manufacturing employment levels remained low
  • Increase in oil prices

If these are the facts to create a story with a heading of the bottom is reached, then I wonder what happens in late October, when U.S. government proudly presents that the annual deficit is only 1,7 trillion instead of an expected 1,8 or so. Guess we will see the DOW at 10,000 then.

I really don't get it.

investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Re: The FED's Beige Book

If it's anything like the accounting rule change for the bankers. When they told everyone now they are making money instead of losing it? We know how government accounting is.

http://www.shadowstats.com/

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: The FED's Beige Book

Michael Höhne - you took the time to read the actual report rather than just the spin - how many others did the same?  Less than 1%?

The sad reality is that most people no longer expect the truth from the MSM and government but inexplicably, few seem to care.

Larry

Lakhota's picture
Lakhota
Status: Bronze Member (Offline)
Joined: May 6 2009
Posts: 44
Re: The FED's Beige Book
investorzzo wrote:

If it's anything like the accounting rule change for the bankers. When they told everyone now they are making money instead of losing it? We know how government accounting is.

investorzzo,

The Beige Book is/was nothing like the accounting rule change.  The accounting rule was quite easy to break down and assess on its own merit.  I'm not sure if you read up on the change, but essentially, the firms were shifted to "regular" bank status, they shifted to calendar year reporting.  In the case of Goldman-Sachs, they were able to write-off their losses in December, but weren't required to report them for the quarter beginning in January.  Goldman reported earnings of almost $4.5 billion when in truth, they actually made about one third that amount.  The implications of the rule change were very easy for an interested individual to sort out.

I do not believe the Beige Book will ever provide such transparency.

Cetan

becky's picture
becky
Status: Silver Member (Offline)
Joined: Jan 8 2009
Posts: 113
Re: The FED's Beige Book

Thank you Michael.

I just looked through the Beige Book and the idea that this means the bottom has been reached reminds me of somebody falling off a steep cliff.  Bruised and battered, bouncing off rocks, and finally being snagged by a branch.  "Whew! I've stopped falling.  I must have reached the bottom.  That wasn't so bad."  And then the branch breaks...

becky

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