Atlanta Fed: Business Inflation Expectations Flat in November

The Atlanta Federal Reserve’s Business Inflation Expectations (BIE) declined marginally by 0.1% to 2.2% in November, largely unchanged from October. The index has remained largely unchanged for the last 4 months — ranging from 2.1% to 2.3% over the last 6 months and 2.0% to 2.3% over the last 12.

That’s important to keep in mind when listening to mediates panic over tariffs.

The BIE measures the year-ahead inflationary expectations of businesses in the Sixth District. It’s also meant to inform about cost changes and insight into the factors driving business’ pricing decisions.

In October, the year-on-year rate for average hourly earnings shot up 0.3% to 3.1%, which was not reflected in the monthly 0.2% gain. Last month, the Bureau of Labor Statistics (BLS) reported average hourly earnings, or wages, grew at the fastest pace since the Great Recession.

For the special question in the Business Inflation Expectations for August, firms gave their expectations regarding the expected year-ahead percentage change in their employees’ wages. The median expectation was for a 3% increase in wages over the next 12 months, higher than the 2.9% in the BLS report for that month.

For the special question in the Business Inflation Expectations for this month, firms provided an estimate of the percentage of their expected unit cost increase over the next 12 months they anticipate passing on to their customers. The “pass through percentage” was 75%, with roughly one quarter estimating their expected pass through percentage was higher than normal.

For the quarterly question, the majority of firms reported that they expect labor costs and non-labor costs “to put moderate to upward influence on their prices over the next 12 months.” Most firms see sales levels, productivity, and margin adjustments having marginal or even no influence on prices over the next 12 months.