Despite Tariff Panic, Business Inflation Expectations Remain Unchanged

Chairman, CEO and President of Nucor John Ferriola and U.S. Steel CEO Dave Burritt flank U.S. President Donald Trump as he announces his administration will levy new tariffs to product U.S. steel and aluminum manufacturing companies. (Photo: Reuters)

Despite widespread media panic over tariffs, the Atlanta Fed Business Inflation Expectations remained unchanged at 2.1% in August. The index has remained unchanged for the last 3 months.

In fact, while business inflation expectations have fluctuated, they overall have remained unchanged since December 2017. In fact, they’ve ticked down since a one-time increase to 2.3%.

In December 2016, the month to report just before Donald Trump was inaugurated, business inflation expectations came in at 2.1%.

Further, even as sales levels remained “about normal,” profit margins improved somewhat and year-over-year unit costs increased somewhat to 2.0%, on average.

The majority of firms expect labor costs to put moderate upward pressure on prices over the next 12 months. Worth noting, the Bureau of Labor Statistics reported today that labor productivity rose 2.9% for Q2 2018 and unit labor costs are down 0.9% on an annual basis.

Fifty percent (50%) of firms said they expect non-labor costs to also put moderate upward pressure on prices over the next 12 months. Most firms expect productivity, margin adjustment, and sales levels to have little or no influence on prices over the next 12 months.

Still, the special question for the month asked about their expectations regarding the influence of recently enacted tariffs on their sales revenue, number of employees, input costs, and capital investment over the next 12 months.