Businesses said in April that they expect their unit costs to increase by 2.8% over the next year, a figure that is 0.3 percentage points higher than it was in March.
These year-ahead unit cost expectations are lower than the peak of 3.8% seen in April 2022 but remain above the pre-pandemic average of 2% seen from January 2017 through December 2019, the Federal Reserve Bank of Atlanta said in the April edition of its Business Inflation Expectations (BIE) Survey.
When asked if they thought they could pass these higher costs along to their customers, the answers varied by the size of the business, according to the survey.
“Small firms reported a lower ability to pass through unit cost increases, while medium and large firms reported a large distribution of ability to pass through unit cost increases,” the survey said. “Goods reported slightly greater pass through unit cost increases than services.”
There was variation by sector, but it was “clear” that medium and larger firms were more likely than small firms to report having the ability to pass through unit cost increases, per the survey.
S&P Global reported Wednesday that firms are charging higher prices for goods and services because of rising costs caused by tariffs, import prices and labor costs.
Prices charged for goods and services rose at the sharpest rate seen in 13 months in April, with tariffs driving an especially steep increase in prices of manufactured goods, S&P Global said.
The Consumer Price Index (CPI) released April 10 showed that consumer prices decreased by 0.1% on a seasonally adjusted basis in March, but that data came before tariffs roiled global trade and inflation reignited, PYMNTS reported at the time.
The Atlanta Fed’s BIE Survey released Wednesday also asked businesses if they were concerned about a recession in the next 12 months. About 25% said in April that this is a “significant concern.” That figure is up from about 11% from September, when the Atlanta Fed last asked this question.
The survey also found that about 9% of businesses said they believe the United States is already in a recession, a figure that is up from 0 in September. In April, about 73% of firms worried about a potential recession cited U.S. trade policy as a reason for their concern.
“Everything has taken a back seat to trade policy,” the survey said.
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