The Beige Book and Current Consumer Spending

This is the official description of the Beige Book:

Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.

When I worked at the Federal Reserve, I reported on construction for one year and banking for two years for the fourth district (Cleveland). This involved talking to CEOs and CFOs in each industry about the current economic climate. As an interesting side note, data from the banking sector was very easy to obtain, as many banks somewhat "fear" the Federal Reserve. However, other sectors are relatively close-mouthed about their business performance, particularly if they are doing badly. Overall, a great deal of work goes into the preparation of the Beige Book, especially weeding out true answers from false, and deciding exactly who is a reliable contact.

But enough about that.... on to the assignment....

Go to the Federal Reserve Web site, www.federalreserve.gov, and select About the Fed, then The Federal Reserve System, and then Districts and Banks. Choose one Federal Reserve District. Next, return to the Fed home page and select Monetary Policy, then Reports, and then Beige Book. Locate the current Beige Book report and compare consumer spending for the entire US economy with consumer spending in the Federal Reserve District you chose. What are the economic strengths and weaknesses in both your district and nationwide? Are retailers reporting that recent sales have met their expectations? What is the employment situation in the district you chose?

Data Exercise 2:

Go to the Bureau of Labor Statistics (BLS) website for Consumer Price Index (CPI) data at http://www.bls.gov/cpi. On the left side of the page click on “CPI tables”. Click on the most recent “Consumer Price Index Detailed Report, complete text and tables” in the middle of the page (the most recent report should be the top link).

Create a chart showing the seasonally adjusted percentage change in CPI all items, CPI less food and energy, and three components of your choice (example: electricity, apparel, and shelter) for each month of the past year. You will have to use additional older CPI tables in order to collect the required data. (note: the numbers may vary slightly. For example, if you look at the May table, the April number may be 0.4. If you look at the June table, the April number may have been revised to 0.3. You can choose to use either of these numbers, as we’re looking at overall movement rather than minute details). Your chart should have the five components you are analyzing across the top row with the statistics reported in each corresponding column.

Please write a two page, double-spaced essay analyzing the data. Be sure to answer the following questions: What has been the general trend in CPI movement over the past year? What about the past three months? Based on this information, is the country experiencing inflation or deflation? What is the trend in CPI excluding food and energy? What does this information tell you about how food and energy prices are currently affecting CPI and overall inflation/deflation?

What has been the trend in the movement of the three components you have chosen to analyze? Does this information match your overall view of the economy? Have you noticed similar price increases/decreases in your day-to-day life?