Fed Beige Book to Give Insight on How Recent Stage in Crisis Hurts Main Street

By: • Tue, Oct 14 2008, 5:05 PM

Economists say the Beige Book document to be released Wednesday will be looked at closely by the Federal Reserve, in order to get the first comprehensive look at how September's turmoil affected regional conditions across the nation.

The Beige Book is an anecdotal summary of economic conditions over roughly the past six weeks in each of the 12 Federal Reserve Bank districts. The Federal Open Market Committee and analysts look to the compilation of comments by regional Fed banks to get a non-numerical picture of conditions across the country.

David Sloan, senior economist at 4Cast, said the report should give some indication as to how the latest and most severe phase of the credit crunch hit Main Street. He said he'll be looking across the board at the impact on business conditions, consumer spending, and labour markets. But above all, the potentially adverse impact on business spending will be worth reading.

Avery Shenfeld, senior economist at CIBC World Markets, said the Beige Book gathers more attention from economists than traders, mainly because there is no single number released that markets can forecast and base their trades on. He added the report is at least worth scanning as it offers a very up to date look at each of the 12 regions in the U.S.

Sloan said the credit crisis has nationwide effects, so there are no particular areas that he's singled out to analyze.

As far as markets are concerned, Sloan said traders should give the Beige Book attention to gain insight on how the Federal Reserve will be thinking at the upcoming FOMC meeting on Oct. 29.

The last Beige Book, released on Sept. 3, revealed broad-based weakness, tight credit conditions and elevated price pressures across the U.S., though not a single region was in outright contraction.

The St. Louis and Cleveland districts reported further weakening in the six weeks leading to September, while the Boston and New York districts saw signs of stabilization, and Kansas City noted a slight improvement.