Fed Beige Book Shows Progress

Economic Blog

The gradual reopening of the US economy has started to lift Main Street sentiment from depressed levels, according to the Federal Reserve’s (Fed) Beige Book. Despite growing concerns about rising COVID-19 cases in several pockets of the country, economic activity has returned in most industries.

In its Beige Book, the Fed presents qualitative observations made by community bankers and business owners—or “Main Street”—about economic (housing, labor market, manufacturing, nonresidential construction, prices, tourism, wages) and banking conditions (lending conditions, loan demand, loan quality). At LPL Research, we maintain an indicator called the Beige Book Barometer (BBB) to gauge Main Street’s sentiment by looking at how frequently key words appear in the text.

As shown in the LPL Chart of the Day, while the Beige Book Barometer remains in negative territory following a brutal stretch for businesses earlier in the year, it has ticked 20 points higher since the last iteration, rising from the lowest level since 2011. Positive words rose by 28 points—primarily in reference to retail, wholesale trade, and manufacturing—while negative words rose by only 8 points.

View enlarged chart.

Following strong US Bureau of Labor Statistics reports in May and June, respondents to the Fed survey noted that loans made through the Paycheck Protection Program helped retain workers; however, they expressed that consumer demand would ultimately determine whether they could avoid layoffs going forward. Further, nearly every Fed district in the report noted difficulty in bringing back workers because of health and safety concerns, childcare needs, and generous unemployment insurance benefits.

While the rebound in economic data and the subsequent boost in main street sentiment are welcome developments, the rise in recent COVID-19 cases that has caused several states to roll back or delay plans for reopening may increase economic uncertainty. If this weighs on consumer spending and business activity, further action by policymakers may be necessary to bolster economic activity.



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The Beige Book is a commonly used name for the Fed report called the Summary of Commentary on Current Economic Conditions by Federal Reserve District. It is published just before the Federal Open Market Committee meeting on interest rates and is used to inform the members on changes in the economy since the last meeting.

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