The Beige Book

The Beige Book

The Federal Reserve produces The Beige Book, a publication examining the current economic conditions across 12 Federal Reserve Districts. It presents regional economic trends based on qualitative information collected from analyst within the district. With this information the Federal Reserve is able to characterize economic dynamics and identify trends in the economy – that may just be emerging in the market and that may not be apparent in the current economic data.

The information in The Beige Book is gathered by bank reports and Branch directors, in-person and phone interviews conducted via questionnaire, community leaders, economists, market experts and a variety of other sources. This information tends to be anecdotal but supplements the data and analysis that is then used by Federal Reserve Districts.

The Schaumburg Business Association (SBA) reviewed the contents of May’s Beige Book and has summarized the key observations that have a correlation, and impact, on the Schaumburg economy:

Beige Book Observation: 

Banking and Finance saw a slight increase in the demand for business loans. This was most likely driven from the growth in small business lending. This conclusion draws from the fact that the loans were primarily written for financing real estate and capital equipment.

SBA PERSPECTIVE

Dating back to the Fall of 2017 a consistent discussion item the SBA engaged in revolved around access to capital. These financing discussions were not limited to a particular industry, but small businesses in each sector were interested in tapping into new capital for their expansion. Much of the Schaumburg experience was centered around financing for capital equipment rather than real estate expansion. Financing for new equipment seems to have a correlation to the tight labor market and the inability to find qualified, and skilled, talent to fulfil orders.

Beige Book Observation: 

Manufacturing saw a moderate production in steel. This was most likely in response to the slowing of importing steel due to the new steel and aluminum tariffs. As would be expected, manufacturing saw the correlation between the increase in capital equipment loans, and the demand for heavy machinery.

SBA PERSPECTIVE:

Schaumburg, and Chicagoland, is widely recognized as one of the leading regions for metal manufacturing in the United States. With a considerable concentration of machine manufacturing, Schaumburg’s manufacturing experienced a slight slow-down, or “cool-down” period, in orders and demand. This cooling was recognized to have taken place from the beginning of April through mid-May as the national implications of tariffs were sorted out. This unexpected uncertainty stalled many plans for capital expansion as there was a lack of confidence in the ability to payback the loan.

Beige Book Observation: 

Chicago, which is the 7th district, saw a moderate growth in economic activity. There was a strong increase in manufacturing, a moderate increase in employment, and there was a modest rise in in business and consumer spending. These trends are expected to continue at a moderate pace over the next 6-12 months.

SBA PERSPECTIVE:

During the first-half of 2018, 72% of businesses cited increased business growth and sales increase. Up until early April there had been a strong demand for goods and services for many of Schaumburg’s industries, but economic uncertainty at a national, and international level, resulted in moderate economic growth during April and May. This sudden “cool-down” had an impact on hiring, planned business spending, and business expansions. Many of the business executives believed this moderate pace would be short-lived and sales would return to their pre-April numbers.

SBA Review:

While the findings of The Beige Book are not empirical they do offer an insight into the current trends happening in the Chicagoland market. The trends outlined in May’s Beige Book are comparable to the information, and perspectives, gathered by the SBA during the same period of time. Though recent economic outlook has been mired by uncertainty because of the potential implications of federal economic policy there has still a local demand for expansion. Discussions have centered around workforce hiring and capital equipment – even during the recent “cool-down”. There is a belief that the market will adjust and return to earlier 2018 outputs resulting in the need to commit to their expansion. These expansion opportunities have significant value for the members of the SBA as much of the need will center around accessing new lines of capital, improvements in HR, and new technologies. To read the full report please follow the link. If you have questions regarding the content and its similarities and potential impacts on Schaumburg please reach out to the Schaumburg Business Association for more information.

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