The State of the Economy, According to the Federal Reserve Board’s “Beige Book”

The goal of our Federal Reserve is to “provide the nation with a safe, flexible and stable monetary and financial system.”  Basically, it’s a big fat bank providing our private banks with stabilization when needed and overseeing the many actions of our private banks within twelve separate districts in the US.

And you may not know that the Federal Reserve also offers some pretty cool reporting too.  A lot of nerdy stats.  For example, you can go to the statistical pages of the Federal Reserve and see how consumer credit is fairing from 2004 through July of 2009 (the table below is a direct copy from the Federal Reserve site here):

CONSUMER CREDIT OUTSTANDING
Seasonally adjusted
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                                                                                 2008                            2009
                                                                        _______________________ _______________________________________

                                2004 r  2005 r  2006 r  2007 r  2008 r   Q2 r    Q3 r    Q4 r    Q1 r    Q2 r    May r   Jun r   Jul p
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Percent change at annual rate 2
  Total                            5.6     4.5     4.1     5.6     1.6     4.1     0.6    -3.0    -3.7    -6.6    -4.2    -7.4   -10.4
   Revolving                       4.1     3.8     5.0     7.8     1.9     5.0     3.3    -7.3    -9.6    -9.7   -12.1    -6.4    -8.0
   Nonrevolving 3                  6.4     4.9     3.6     4.4     1.4     3.6    -1.0    -0.4    -0.2    -4.8     0.4    -8.0   -11.7

Amount: billions of dollars
  Total                         2191.5  2291.0  2384.8  2519.5  2559.1  2574.3  2578.3  2559.1  2535.3  2493.6  2509.2  2493.6  2472.1
   Revolving                     799.2   829.8   871.3   939.6   957.3   967.2   975.2   957.3   934.3   911.7   916.6   911.7   905.6
   Nonrevolving 3               1392.3  1461.2  1513.5  1579.9  1601.8  1607.1  1603.2  1601.8  1601.0  1581.9  1592.6  1581.9  1566.5

Note above that revolving credit by consumers started at $799 billion in 2004 (second line from the bottom), steadily rose to $975 billion by the second quarter of 2008 (22% increase over 4 years), and then started dropping. American’s credit card bills finally ended up at $905 billion by July of 2009 (a 7% decrease).  Pretty interesting to see how the recession has affected our consumer debt habits (probably should have decreased more than 7%!).

The Federal Reserve has another report called the “Beige Book”, and it is published 8 times per year by the Federal Reserve as a sort of “state of the economy” in the twelve districts around the country.  Its less statistical data, and more anecdotal in nature, making it easier for the lay person (like me) to understand.  A recent reading of the January report as compared to the most recent September report should give us cause to rejoice.  The economy finally seems to be stabilizing and possibly headed for more positive ground.

January “Beige Book” Quotes (editorial comment: “it sucked eggs”)

“Overall economic activity continued to weaken across almost all of the Federal Reserve Districts since the previous reporting period.”

“Conditions in residential real estate markets continued to worsen in most Districts.”

“Reports of retail sales during the holiday season were generally negative in most Districts.”

“According to reports from the New York District, year-end bonuses at financial firms are seen falling 20 to 30 percent from a year ago at some of the smaller firms but more substantially at the larger establishments.”

September “Beige Book” Quotes (editorial comment:  ”woot! woot!”)

“A majority of Districts confirmed that the “cash-for-clunkers” program boosted traffic and sales. Richmond, Atlanta, Chicago, and Minneapolis also noted increases or planned increases in automobile-related production.”

“Most Districts noted that demand remained stronger at the low-end of the housing market.”

“Kansas City and Richmond cited increasing demand for technology-related services. Healthcare services in Minneapolis also experienced an uptick in demand.”

“Most Districts reported modest improvements in the manufacturing sector.”

All in all, I would say these reports are exciting.  You can still read caution in the September report, but you can find optimism there too.  My clients have had a rough year, and I’m looking for some relief for them.  And that always spells relief for my firm as well.  So, chin up, America.  We’re coming out of this, dang it!

Jason M. Blumer, CPA, is the Managing Shareholder of Blumer & Associates, CPAs in South Carolina, and the writer of the THRIVEal blog.  He and his firm are notoriously addicted to preaching, installing and improving the processes in their firm, their client’s businesses and their industry as a whole.  Their interests lie in helping their clients THINK, RESPOND, GROW and  THRIVE.  With a niche focus on the newer generations in the professional services industries, Jason and his team often wear flip flops and jeans to work and refer to their client base as “dudes”.