The inflation expectations of businesses in the Southeast for the coming year was 1.7 percent in September, down from 1.9 percent in August, according to the Federal Reserve Bank of Atlanta’s most recent business inflation expectations (BIE) survey. The survey was conducted September 10–14 with 192 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 1.7 percent over the next 12 months. That number is down slightly from 1.9 percent in August and is a bit below recent year-ahead inflation forecasts of private economists. Inflation uncertainty declined by 0.2 percentage point to 2.6 percent in September. Firms reported that their unit costs rose 1.3 percent compared to this time last year, which is 0.3 percentage point lower than their assessment in August.

Factors Influencing Price Changes

According to the businesses surveyed, firms continue to operate in an environment of below normal sales levels and profit margins, however, both showed improvement in September. Projecting ahead, firms continue to anticipate little or moderate upward pressure coming from input costs over the next 12 months. Businesses' expectations for the price influence from both labor and non-labor costs over the next year held roughly steady in September. Respondents also anticipate that margin adjustments and sales levels are likely to have a small upward influence on the prices they charge in the coming year.

Questions Answered

This month, the Atlanta Fed asked businesses a special question aimed at gauging how much current sales levels differ from "normal" times. On average, firms see sales levels as about 7.6 percent below normal, though their assessment of current performance varied widely by the size of the firm. Firms with fewer than 500 employees reported that current sales levels were roughly 9.6 percent below normal. That gap is nearly twice as large as the 4.9 percent below normal figure reported by larger firms (500-plus employees).