Beige Book Suggests Continued Moderate Economic Growth

The Federal Reserve’s (Fed) latest Beige Book, released on Wednesday, January 17, 2018, continued to deliver a positive view of the U.S. economy. The Beige Book is a qualitative assessment of the domestic economy and each of the 12 Fed districts individually, and is more focused on “Main Street” as opposed to “Wall Street.” The report is prepared eight times per year, ahead of each Federal Open Market Committee meeting—the next of which is set to take place from January 30-31, 2018.

LPL Research’s Beige Book Barometer (BBB) evaluates the sentiment behind this qualitative report. The BBB is a diffusion index measuring the number of times the word “strong” or its variants appear in the Beige Book less the number of times the word “weak” or its variants appear. When the BBB is declining, it suggests that the economy is deteriorating; when it’s advancing, it suggests that the economy is improving.

The BBB increased from +53 in November to +62 in the latest report, with the improvement driven by a decrease in weak words. This number is in line with the average reading of +64 over the course of 2017, and in the middle of its multi-year range. Historical data suggest gains in the barometer that are driven by a decrease in weak words (which fell very near to expansion lows in this edition) implies the economy is expanding at a steady pace. On the other hand, a spike in strong words would be indicative of an accelerating economy. For more on the BBB, including an analysis of wage growth, inflation, and tax reform mentions, please see the most recent Weekly Economic Commentary, “Beige Book: Window on Main Street”

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