MNI: CFOs See Cost Pressures for 8-10 More Months -Fed Survey

U.S. finance executives see inflation pressures lasting into the first quarter of next year and some for much longer, according to a new survey from the Richmond and Atlanta Fed banks,.

About 80% of CFOs from over 300 firms surveyed by the Richmond and Atlanta Fed banks between June 21 and July 2 said their input costs have been larger than normal recently. The majority of firms anticipate the higher cost environment to persist for eight to 10 months, with a quarter of respondents expecting cost growth to persist through the end of 2022.

Inflation on a whole has become firms' No. 2 concern, after the shortage of qualified labor. Three out of four CFOs surveyed said they have difficulty finding new employees for open positions, consistent with record high job openings figures in the BLS's JOLTS survey.

An Atlanta Fed analysis of the survey data estimates that labor shortages have cost the economy 2.1% in nominal sales revenue, equivalent to an annual reduction in national gross output of USD35.1 billion.

COST PASS-THROUGH

Three-quarters of respondents reported passing some of the higher cost to customers. Those that are passing through more than 50% of cost increases expect much higher average price changes in 2021 and 2022.

Businesses that sell to other businesses appear more aggressive in passing through input cost increases, meaning the ultimate impact on retail prices is likely to be dampened. Firms are hesitant to fully pass on cost increases directly to consumers, economists from the two Fed banks said.

The median anticipated price change in firms' primary products is about 3.8%, up from nearly unchanged a year ago.

Dallas Fed President Robert Kaplan told MNI in an interview Tuesday he has raised his inflation forecast for the remainder of the year and into 2022 on a significant widening of price pressures.