Profitability Issues

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 BIE Survey of September 20 (pdf) (involving 206 firms responding) :

Respondents indicated that, on average, they expect unit costs to rise 1.9 percent over the next 12 months, roughly in line with the recent year-ahead inflation forecasts of private economists. Inflation uncertainty was virtually unchanged at 2.4 percent in September from 2.3 percent in August. Firms also report that, compared to this time last year, their unit costs are up 1.7 percent. Sales levels were little changed in September, with 52 percent of respondents now saying their current sales levels are at or above normal compared to 53 percent in August. Profit margins also changed only slightly, with 49 percent of respondents indicating their profit margins are at or above normal, compared to 45 percent in August.

Among questions and responses seen in the report include the following:

• “How do your current PROFIT MARGINS compare with ‘normal’ times?”
• This month’s “quarterly question” asked “By roughly what percent are your firm’s sales levels above/below “normal,” if at all?”
• The “special question asked respondents to indicate whether they felt that their firm’s performance was a leading, lagging, or coincident indicator of overall economic recession or expansion.”

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Each month the Philadelphia Fed releases the Business Outlook Survey, which contains a variety of information concerning business conditions.

As seen on the site:

The Business Outlook Survey is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, prices paid, and prices received. The survey has been conducted each month since May 1968.

One component of this survey are diffusion indices for both “Prices Paid” and “Prices Received.” (for those unaware, this survey provides the following definition:  ”Diffusion indexes represent the percentage indicating an increase minus the percentage indicating a decrease.”)

Doug Short provides a monthly blog post concerning the Philadelphia Fed’s Business Outlook Survey.  For reference purposes, here is a chart he has created that shows, from a long-term perspective, the “Prices Paid” and “Prices Received” diffusion indices (shown by the dots) and their 12-month moving averages (shown by the solid lines) :

(click on chart to enlarge image)

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