The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
April 2012 For immediate release: April 16, 2012 Contact: Jean Tate, 404-498-8035 or jean.tate@atl.frb.org The inflation expectations of businesses in the Southeast for the coming year rose to 2.1 percent in April, up from 2.0 percent in March, according to the Federal Reserve Bank of Atlanta’s most recent business inflation survey. The survey was conducted April 9–13 with 165 firms responding to questions about their business conditions, inflation outlook, and potential pricing pressures. The results are summarized below. EXPECTED CHANGE IN UNIT COSTS Survey respondents indicated that, on average, they expect unit costs to rise 2.1 percent over the next 12 months. That number is up from 2.0 percent in March and comparable to recent year-ahead inflation forecasts of private economists. Inflation uncertainty rose from 2.4 percent in March to 2.7 percent in April. Firms also reported that their unit costs had risen 1.9 percent compared to this time last year, which is 0.1 percentage point higher than their assessment in March. 2.1% from 2.0% in March FACTORS INFLUENCING PRICE CHANGES According to the businesses surveyed, firms are still operating in an environment of below normal sales and depressed margins. Looking forward, firms' expectations for non-labor costs rose in April, with 57 percent predicting a moderate upward influence on prices coming from materials and other non-labor costs over the next year. Eighteen percent predicted a strong upward influence from those costs—the highest percentage since the survey was launched in October 2011. Firms anticipate labor costs will put little or only moderate upward pressure on prices in the year ahead. Respondents also anticipate that their sales, margin adjustments, and productivity are likely to have a small, though positive, influence on prices in the coming year. SPECIAL QUESTION During the first month of each quarter, the Atlanta Fed will ask a special question aimed at measuring firms' inflation expectations and inflation uncertainty over the longer term. On average, survey respondents in April project unit costs to rise by 3.0 percent per year over the next five to 10 years, which is 0.1 percentage point higher in February, the previous time the question was asked. Firms' uncertainty about the future path of inflation declined to 2.6 percent from 2.8 percent in February (measured by the average respondent's variance). 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 18% 37% 31% 14% 1% -28 March 18% 29% 31% 21% 1% -21 April 17% 36% 27% 18% 2% -23 How do your current PROFIT MARGINS compare with "normal" times? Much less Somewhat less About normal Somewhat greater Much greater Diffusion Index* February 17% 44% 32% 8% 0% -35 March 14% 42% 32% 11% 0% -30 April 19% 36% 36% 9% 0% -32 Looking back, how do your UNIT COSTS compare with this time last year? Down (<-1%) 7% About unchanged 21% Up somewhat (1.1%52% to 3%) Up moderately (3.1%16% to 5%) Up a lot (>5%) 4% Average March 6% 23% 55% 12% 5% 1.8% April 3% 24% 56% 12% 6% 1.9% February 1.8% Projecting ahead over the next 12 months, how do you think the following five common influences will affect the prices of your products and/or services? Strong downward influence Moderate downward influence Little/no influence Moderate upward influence Strong upward influence Diffusion Index† February 0% 1% 48% 49% 2% 26 March 0% 4% 37% 53% 6% 30 April 0% 1% 43% 52% 4% 29 February 0% 2% 24% 62% 12% 42 March 0% 3% 27% 57% 13% 39 April 0% 0% 24% 57% 18% 47 February 0% 15% 67% 18% 1% 2 March 0% 20% 64% 14% 2% -1 April 0% 15% 66% 16% 2% 2 February 0% 17% 56% 27% 0% 5 March 1% 11% 63% 26% 0% 7 April 2% 13% 57% 26% 2% 6 February 2% 18% 45% 32% 4% 9 March 1% 15% 45% 36% 2% 11 April 1% 19% 46% 32% 2% 7 Labor Costs Non-Labor Costs Productivity Margin Adjustments Sales Levels 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 Up Up unchanged somewhat moderately (-1% to 1%) (1.1% to 3%) (3.1% to 5%) Up a lot (>5%) Average Median Mode Variance February 7% 29% 38% 16% 10% 1.9 1.8 1.8 2.8 March 6% 25% 42% 17% 9% 2.0 2.0 1.9 2.4 April 5% 27% 37% 20% 10% 2.1 2.0 2.0 2.7 Special Projecting ahead, to the best of your ability, please assign a percent likelihood to the following Question: changes to unit costs per year over the next FIVE TO 10 years. Number of responses Down (<-1%) About Up Up unchanged somewhat moderately (-1% to 1%) (1.1% to 3%) (3.1% to 5%) Up a lot (>5%) Average Median Mode Variance February (89) 4% 11% 38% 29% 17% 2.9 2.9 2.9 2.8 April (152) 4% 12% 36% 30% 18% 3.0 3.0 2.9 2.6 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. †The diffusion index is calculated such that each response of strong downward influence is assigned a value of –100, moderate downward influence is assigned a value of –50, little/no influence 0, moderate upward influence 50, and strong upward influence 100. Therefore, a positive index value indicates that overall prices are being influenced upwards, on average, and a negative index value indicates that prices are being influenced downwards, on average.