The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
BIE April 2014 Atlanta Fed Survey of Business Inflation Expectations For immediate release: April 16, 2014 Contact: Jean Tate, 404-498-8035 or jean.tate@atl.frb.org The year-ahead inflation expectations of businesses were 1.9 percent in April, according to the Federal Reserve Bank of Atlanta’s most recent business inflation expectations (BIE) survey. The survey was conducted April 7–11 with 181 firms responding to questions about their business conditions, inflation outlook, and potential pricing pressures. The results are summarized below. Year-ahead inflation expectations and current conditions 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 1.7 percent. Respondents’ sales levels compared to what they consider “normal” conditions went virtually unchanged, with approximately 52 percent indicating current sales levels are at or above normal. Profit margins improved, with roughly 51 percent of respondents indicating their profit margins are at or above normal, compared to 41 percent in March. Quarterly question: Long-term inflation expectations Over the long term, that is, per year over the next five to 10 years, respondents expect unit costs to increase 2.7 percent, on average, virtually unchanged from the January reading of 2.8 percent. Respondents’ uncertainty (variance) regarding this expectation was unchanged at 2.5 percent. Special question: Year-ahead unit sales level change expectations The question assessed the full range over which panel members anticipate their unit sales levels could change over the next 12 months. To elicit this range, respondents were asked to provide percentage estimates for five distinct scenarios. Respondents were then asked to assign percentage likelihoods to those same scenarios. The median respondent’s year-ahead unit sales growth expectation was 2 percent; however, the estimates varied widely. Please see page 3 for a breakdown of the results. For more information and interactive charts, visit the BIE survey site at www.frbatlanta.org/research/inflationproject/bie/. Monthly Questions Year-Ahead Inflation Expectations and Uncertainty (percent) 3.5 3.0 2.5 2.4 2.0 1.9 1.5 Uncertainty Year-ahead unit cost expectations 1.0 0.5 0.0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Source: Atlanta Fed Business Inflation Expectations (BIE) Survey Sales Levels and Profit Margins Compared to Normal Times Year-over-Year Unit Costs (percent) (diffusion index, 0+ = greater than normal times) 5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 3.5 Sales levels Profit margins -21 -25 3.0 2.5 2.0 1.7 1.5 1.0 0.5 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Source: Atlanta Fed Business Inflation Expectations (BIE) Survey 0.0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Source: Atlanta Fed Business Inflation Expectations (BIE) Survey Quarterly Question Long-Term Inflation Expectations and Uncertainty (percent, per year over the next five to 10 years) 3.5 2.7 3.0 2.5 2.5 2.0 1.5 Long-term Inflation Expectations Uncertainty 1.0 0.5 0.0 Jan-13 Apr-13 Jul-13 Source: Atlanta Fed Business Inflation Expectations (BIE) Survey Oct-13 Jan-14 Apr-14 Special Question Projecting ahead over the next 12 months, please provide an approximate percentage change in your firm's sales levels for the following scenarios. mean percentage change 20 16 15 median: 2.0 percent 10 10 4 5 0 -2 -5 -10 -9 -15 Worst case Low case Middle case High case Best case Source: Source:Atlanta AtlantaFed FedBusiness BusinessInflation InflationExpectations Expectations(BIE) (BIE)Survey Survey Projecting ahead over the next 12 months, please provide an approximate percentage change in your firm's sales levels for the following scenarios. mean percentage likelihood 45 40 40 35 30 23 25 18 20 15 10 10 9 5 0 Worst case Low case Middle case Source: Atlanta Fed Business Inflation Expectations (BIE) Survey High case Best case How do your SALES LEVELS compare with sales levels during what you consider to be “normal” times? Much less Somewhat less About normal Somewhat greater Much greater Diffusion index* February 12% 39% 28% 20% 1% -21 March 12% 37% 33% 17% 1% -21 April 15% 33% 33% 17% 2% -21 How do your current PROFIT MARGINS compare with “normal” times? Much less Somewhat less About normal Somewhat greater Much greater Diffusion index* February 10% 42% 35% 13% 0% -24 March 14% 46% 31% 9% 1% -32 April 14% 35% 40% 9% 2% -25 Up a lot (>5%) Mean Looking back, how do your UNIT COSTS compare with this time last year? Down (<-1%) About unchanged (-1% to 1%) February 5% 23% 54% 13% 4% 1.8% March 4% 21% 62% 9% 3% 1.7% April 5% 21% 61% 7% 5% 1.7% Up somewhat Up moderately (1.1% to 3%) (3.1% to 5%) Projecting ahead, to the best of your ability, please assign a percent likelihood to the following changes to unit costs over the next 12 months. Down (<-1%) About unchanged (-1% to 1%) Up somewhat (1.1% to 3%) Up moderately (3.1% to 5%) Up a lot (>5%) Mean (Variance) February 6% 24% 43% 19% 8% 2.0% (2.4%) March 7% 28% 42% 16% 7% 1.8% (2.4%) April 6% 27% 44% 16% 8% 1.9% (2.4%) Quarterly Question: Projecting ahead, to the best of your ability, please assign a percent likelihood to the following changes to unit costs per year over the next FIVE TO 10 years. Unit costs down (<-1%) Unit costs about unchanged (-1% to 1%) Unit costs up somewhat (1.1% to 3%) Unit costs up significantly (3.1% to 5%) Unit costs up very significantly (>5%) Mean February (89) 4% 11% 38% 29% 17% 2.9% (2.8%) April (152) 4% 12% 36% 30% 18% 3.0% (2.6%) July (153) 4% 15% 36% 26% 19% 2.8% (2.9%) October (196) 4% 13% 36% 30% 17% 2.9% (2.7%) January (196) 3% 12% 32% 28% 23% 3.0% (2.5%) April (189) 4% 12% 38% 26% 20% 2.9% (2.2%) Month (number of responses) July (209) 4% 14% 37% 28% 15% 2.8% (2.4%) October (216) 4% 15% 45% 26% 11% 2.7% (2.4%) January (208) 3% 20% 43% 21% 11% 2.8% (2.3%) 3% 16% 42% 30% 8% 2.7% (2.5%) April (181) Note: Percentages may not sum to 100 due to rounding. *The diffusion index is calculated as an average response such that each response of much less is assigned a value of –100; somewhat less is assigned a value of –50; about normal, 0; somewhat greater, 50; and much greater, 100. Therefore, a positive index value implies that the indicator is greater, on average, and a negative index value implies that the indicator is lower, on average.