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Published Friday, January 27, 2012 in Local

Fed survey: Inflation expected at 1.8%

By Walter C. Jones

Morris News Service

ATLANTA – Business executives in the Southeast expect the prices of goods and services to rise 1.8 percent this year, according to a survey released Friday by the Federal Reserve Bank of Atlanta.

The anticipated rate is down slightly from a 1.9 percent average compiled in the previous month and is in line with what most economists predict. When it comes to inflation already being experienced, costs to the businesses surveyed are up an average of 1.5 percent over the previous January.

The survey of 170 firms was conducted Jan. 16-20.

Wages exert slight pressure while the cost of materials and energy were moderately more significant factors on the inflation expectations reported, according to the survey.

Perhaps the good news is that most of the businesses questioned said they were not inclined to make large boosts in their own prices in reaction to their inflation expectations, according to Michael Bryan, senior vice president and economist at the bank. More than one-third said they don't make price increases of less than 1 percent, waiting for the need for a larger jump.

Instead, they report that their own margins are shrinking. Sales are also down in January from the same month a year ago for 56 percent of the firms. Just 17 percent are enjoying higher revenues.

The report is the first public results of a new, monthly survey the bank began conducting in November. Officials there didn't want to begin releasing the results until it had worked the bugs out, such as figuring out how to phrase its questions without suggesting an answer.

For example, the executives were asked about the unit price they expect to set rather than asking about inflation in general, Bryan said.

"We're a little concerned that the concept of inflation is a little too far removed from the way businesses are setting prices," he said.

Bryan said the new survey is unique. Several organizations produce periodic reports on various economic measures or survey economists, but he didn't know of any looking how much inflation is expected by the people who actually set prices.

"It's unique," he said. "That's one of the reasons we wanted to do this. Surprisingly, there is very, very little information on the actual price setters."

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