Twice per quarter, the Federal Reserve publishes a qualitative assessment of the economy called the Beige Book. The Beige Book makes for very interesting reading, filled with anecdotal discussion about the state of output, prices, consumer spending, confidence, and other indicators nationally and in each of the Fed’s individual districts. While useful, the Beige Book is very long, with the most recent edition running in excess of 14,000 words! In an effort to more quickly digest that huge body of text, we have developed an algorithm to quickly summarize the main thrust of the Beige Book. By analyzing the balance of positive words relative to negative words, we summarize what the Beige Book is saying about the economy. As currently constructed, Bespoke’s Beige Book Sentiment index reports the share of positive descriptors less negative descriptors divided by all descriptors. Over time, this diffusion index tends to lead GDP and is more timely, as shown in the chart below.
Readings above zero indicate more positive descriptors than negative ones, and vice-versa. The most recent reading hit a new multi-year high, but it’s still below readings seen during the early part of the current expansion. Only twice has the reading dipped below zero, and they both occurred near the depths of the last two recessions.
Our new Beige Book Sentiment economic indicator will be released in the moments after the Beige Book release twice per quarter (or eight times per year). Access to this new economic indicator and its sub-indices is only available at the Bespoke Institutional subscription level, which you can start a free trial to here. If you have any questions about the Bespoke Beige Book Sentiment index, please submit a contact form at our About page.