–Firms Now See 2012 Infl of 1.7% vs 1.8% in May
–Labor Costs Likely Have Larger Upward Influence on Prices in Coming Yr

By Brai Odion-Esene

WASHINGTON (MNI) – The Atlanta Federal Reserve Bank’s monthly
survey released Friday showed businesses in the Sixth district slightly
lowered their inflation expectations for 2012 to 1.7% compared to the
May survey when they projected a 1.8% rise.

However, the survey said businesses expect “larger upward
influence” on prices coming from labor costs over the coming year.

“Inflation uncertainty was unchanged at 2.9% in June,” the Atlanta
Fed said.

Firms reported that unit costs had risen 1.6% on an annual basis,
unchanged from their assessment in May.

The survey was conducted June 1115 with 167 firms responding to
questions about their business conditions, inflation outlook, and
potential pricing pressures.

The survey noted businesses are still operating in an environment
of below normal sales levels and profit margins, but sales and margins
improved in June.

“Projecting ahead, firms continue to anticipate little or moderate
upward pressure coming from input costs over the next 12 months,” it
said.

The survey said expectations for labor and non-labor costs over the
next year declined for the second consecutive month in June.

“Just 32% of firms expect moderate or strong upward price influence
from sales in the coming year, the smallest percentage since November
2011,” the Atlanta Fed said.

“Respondents also anticipate that margin adjustments are likely to
have a modest upward influence on the prices they charge in the coming
year,” it added.

The survey included a special question — asked each month —
asking firms to estimate the impact of various influences on their
prices over the coming 12 months.

“This month’s special question aims to gauge the impact of those
same factors over the previous 12 months,” the Atlanta Fed said.

The result was respondents estimated that, on balance, margin
adjustments had a “negligible” influence on prices over the past year,
compared with their expectation that margin adjustments may increase
prices slightly over the coming year.

The survey also said respondents believe “labor costs are likely to
have a larger upward influence on prices in the coming year than they
did in the past 12 months.”

But firms largely anticipate similar cost pressure from non-labor
costs over the next 12 months as they experienced in the past year.

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

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MAUDS$]