The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
BIE July 2014 Atlanta Fed Survey of Business Inflation Expectations For immediate release: July 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 July, according to the Federal Reserve Bank of Atlanta’s most recent business inflation expectations (BIE) survey. The survey was conducted July 7–11 with 237 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 virtually unchanged at 2.3 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 worsened somewhat, with approximately 54 percent of respondents indicating current sales levels are at or above normal. However, profit margins showed slight improvement, with roughly 49 percent of respondents indicating their profit margins are at or above normal, compared to 44 percent in June. 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 2.8 percent, on average, nearly unchanged from the April reading of 2.7 percent. Respondents’ uncertainty (variance) regarding this expectation fell to 2.3 percent, down two-tenths of a percent from April. Special question: Firms’ planning horizons The question assessed which horizon was most useful for firms when planning for or forecasting changes in six commonly considered variables: capital investment, prices, unit costs, sales revenue, profit margins, and hiring. Respondents could choose horizons ranging from “less than one month” to “more than 12 months.” They were also given the option to indicate that they do not plan for or forecast a given variable or were simply unsure about their most useful horizon. 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 2.3 2.0 1.9 1.5 Uncertainty 1.0 Year-ahead inflation expectations 0.5 0.0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-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 3.0 2.5 1.8 2.0 1.5 -25 1.0 0.5 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Source: Atlanta Fed Business Inflation Expectations (BIE) Survey 0.0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-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 3.0 2.8 2.5 2.3 2.0 1.5 Long-term Inflation Expectations 1.0 Uncertainty 0.5 0.0 Jan-13 Apr-13 Jul-13 Source: Atlanta Fed Business Inflation Expectations (BIE) Survey Oct-13 Jan-14 Apr-14 Jul-14 Special Question Most Useful Planning/Forecasting Horizon percent of responses 40 Prices Profit margins Revenue Investment Hiring Unit costs 35 30 25 20 15 10 5 0 Less than 1 1 month month 3 months 6 months 12 months More than 12 months Source: Atlanta Fed Business Inflation Expectations (BIE) Survey All are equally useful Fiscal year I don't use this variable Unsure 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* May 12% 34% 33% 20% 1% -18 June 11% 32% 38% 19% 0% -17 July 13% 33% 38% 16% 0% -21 How do your current PROFIT MARGINS compare with “normal” times? Much less Somewhat less About normal Somewhat greater Much greater Diffusion index* May 12% 41% 36% 11% 0% -26 June 10% 46% 31% 13% 0% -27 July 11% 41% 36% 12% 1% -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%) May 2% 22% 64% 9% 3% 1.8% June 2% 22% 61% 10% 5% 1.9% July 3% 20% 61% 12% 3% 1.8% 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. May 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) 6% 26% 42% 19% 7% 1.9% (2.4%) June 5% 24% 45% 18% 8% 2.0% (2.4%) July 5% 26% 44% 17% 8% 1.9% (2.3%) 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 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%) July (209) 4% 14% 37% 28% 15% 2.8% (2.4%) October (216) 4% 15% 45% 26% 11% 2.7% (2.4%) January (208) 4% 20% 43% 21% 11% 2.8% (2.3%) April (181) 3% 16% 42% 30% 8% 2.7% (2.5%) July (223) 4% 19% 35% 26% 14% 2.8% (2.3%) Month (number of responses) 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.