Factors Influencing Price Changes And Inflation Expectations

The Atlanta Federal Reserve 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 May 2014 BIE Survey (pdf) dated May 14, 2014 (involving 182 firms responding) :

Respondents indicated that, on average, they expect unit costs to rise 1.9 percent over the next 12 months.  Inflation uncertainty was unchanged at 2.4 percent. Firms also report that, compared to this time last year, their unit costs are up 1.8 percent. Respondents’ sales levels compared to what they consider “normal” conditions improved somewhat, with approximately 55 percent of respondents indicating current sales levels are at or above normal. Profit margins declined somewhat, with roughly 47 percent of respondents indicating their profit margins are at or above normal, compared to 51 percent in April.

This month’s “quarterly question” concerned factors influencing price change.  As seen in the report:

About 64 percent of respondents expect labor costs to put moderate or strong upward pressure on their prices over the next 12 months. Respondents’ expectations regarding the influence of non-labor costs on prices increased significantly from the last measure, taken in February. Thirty-seven percent of respondents expect sales levels to put moderate or strong upward pressure on prices in the year ahead. The majority of firms expect productivity and margin adjustments to have little or no influence over prices in the next 12 months.

Furthermore, the “special question” asked respondents about their expectations for year-ahead employment outlook.

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


StratX, 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.


ProfitabilityIssues.com is published by StratX, LLC (stratxllc.com).  StratX, 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.