The latest edition of the Federal Reserve Board’s “Beige Book” (the official name of the publication is the Summary of Commentary on Current Economic Conditions) has generated a significant amount of buzz. The latest economic outlook outlined within seems considerably more positive than some recent editions have been. The Beige Book is published eight times throughout the year in conjunction with the Fed’s Open Market Committee meetings, and basically consists of a comprehensive rundown of statistics, trends, information and informed opinions on the latest economic conditions.
To be honest, the fact that the latest Beige Book forecast was so rosy is somewhat unsettling, because it seems fundamentally disconnected from some of the larger structural economic problems still looming. While it is true that—as the book points out—the economy is continuing to expand, retail spending reports have been encouragingly positive, and new vehicle sales remain strong, there is more to the story. The job market has shown some troubling signs of weakness lately, with weekly jobless claims upward and monthly totals not being as strong as anticipated and falling well short of projections in March.
More concerning, however, is the big problem that won’t go away: the European Debt crisis. Unfortunately, this is not over—not by a longshot. Spain is threatening to be the next Greece, with rates for Spanish 10-year bonds recently climbing to 6%, and Italy and Portugal are still limping along as well. Concerns about liquidity and tax revenue have become so profound that the Spanish government has passed some draconian new laws: any cash transactions over 2,500 Euros are banned, and citizens are obligated to inform the government if they maintain a bank account outside of the country. So while the Beige Book outlook might have some analysts brightening up, I’m still inclined to see things as a little more, well, beige.