–Sales, Profit Margins Deteriorate After Improvement in September
–Unit Costs Projected to Rise 2.9%/Year Over Next 5-10 Years

By Brai Odion-Esene

WASHINGTON (MNI) – The Atlanta Federal Reserve Bank’s monthly
survey released Friday showed businesses in the Sixth district raised
their inflation expectations for 2012 to 1.8% from 1.7% in the prior
month, while the measure of their uncertainty about future prices fell
slightly.

The survey also included a special question which noted that on
average firms see unit costs rising by 2.9% each year over the next five
to 10 years.

The survey respondents’ expectation of a 1.8% increase in unit
costs is up from the +1.7% expectation in last month’s survey, but
inflation uncertainty declined by 0.1 percentage point to 2.5% in
October.

Firms reported unit costs had risen by 1.4% on an annual basis, up
from their assessment of a 1.3% rise in September.

The survey was conducted October 1519 with 196 firms responding to
questions about their business conditions, inflation outlook, and
potential pricing pressures.

After some improvement in sales levels and margins last month, the
survey showed “both factors deteriorated in October.”

On their inflation outlook, “Firms continue to anticipate little or
moderate upward pressure coming from input costs over the next 12
months,” the Atlanta Fed said.

The survey said expectations for the price influence from both
labor and non-labor costs over the next year “held steady” in October.

“Respondents also anticipate that margin adjustments and sales
levels are likely to have a small upward influence on prices over the
coming year,” the Atlanta Fed said.

The survey included a special question aimed gauging inflation
expectations and uncertainty over the longer term.

“This month, respondents projected unit costs to rise by 2.9% per
year over the next five to 10 years,” the Atlanta Fed said. “Firms’
uncertainty about the future path of inflation was 2.7%.”

It said that figure roughly mirrors the uncertainty in the
distribution of firms’ year-ahead inflation predictions.

** MNI Washington Bureau: 202-371-2121 **

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