Businesses’ Year-Ahead Inflation Expectations And Factors Impacting Pricing

The Federal Reserve Bank of Atlanta publishes a monthly report titled “Business Inflation Expectations” (BIE) that contains statistics from a survey of regional businesses’ views on various factors that impact profitability.  These factors include unit costs, unit cost expectations, sales levels, profit margins, and other factors.

As described on the site:

Approximately 300 panelists receive the survey each month. Panelists represent businesses of various sizes headquartered within the Sixth District, which encompasses Alabama, Florida, Georgia, and sections of Louisiana, Mississippi, and Tennessee. Panelists range from executives of large corporations to owner-operators of small businesses. The industry composition of the panel roughly reflects the makeup of the national economy. Nevertheless, survey responses are weighted by industry shares of national gross domestic product.

An excerpt from the February 2016 BIE Survey dated February 17, 2016 (involving 215 firms responding):

Respondents indicated that, on average, they expect unit costs to rise 1.8 percent over the next 12 months. Inflation uncertainty rose to 2.3 percent. Firms also report that, compared to this time last year, their unit costs are up 1.2 percent. Respondents’ sales levels, compared to what they consider normal conditions, were virtually unchanged, with approximately 59 percent of respondents indicating current sales levels are at or above normal. Profit margins were also stable, with roughly 55 percent of respondents indicating their profit margins are at or above normal.

This month’s “quarterly question” concerned “Factors influencing price change.”  As seen in the survey results:

Seventy percent of respondents indicated that labor costs will put moderate or strong upward pressure on their prices over the next 12 months. Respondents’ expectations regarding the influence of nonlabor costs on prices declined from the last measure in November, with 54 percent of respondents indicating upward price pressure. Thirty-three percent of respondents expect sales levels to put moderate or strong upward pressure on prices in the year ahead, down from the November measure. The majority of firms expect productivity and margin adjustments to have little or no influence over prices in the next 12 months.

This month’s “special question” concerned “Changes in rate of retirements and impact on the firm.”

The report also includes a variety of charts and tables depicting respondents’ answers.


RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with all (or any) of the views expressed by these outside parties.

—– is published by RevSD, LLC.  RevSD, LLC is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and given these conditions, offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.