| Actual | Previous | |
|---|---|---|
| Year over Year | 2.3% | 2.3% |
Highlights
Firms' year-ahead inflation expectations came in at 2.3 percent in September, unchanged from August but up from 2.1 percent in September 2024.
"Year-ahead unit cost expectations have fallen considerably since hitting a peak of 3.8 percent in April 2022 but remain somewhat elevated relative to their pre-pandemic average of 2.0 percent," the Atlanta Fed says.
Firms' year-ahead unit cost uncertainty has come down some after a peak in July, it added. Presumably, that movement reflects the rise and fall of tariff fears.
In terms of the current economic environment, sales levels and profit margins"compared to normal" decreased after increasing last month. Year-over-year unit cost growth remained relatively unchanged at 2.3 percent, on average.
Companies' long-run unit cost expectations - five to 10 years ahead - remained relatively unchanged from March 2025 at 2.8 percent.
Of note, for September the Atlanta Fed asked companies about how potential changes in their competitors' pricing and changes in conditions would alter their pricing plan.
About half of the respondents said they would increase their prices by some amount in response to a 10-percentage point rise in competitors' pricing regardless of the condition given. However, when informed that cost or a shared impact of cost increases, disproportionate amounts of firms responded with plans to raise prices, it said.
"Year-ahead unit cost expectations have fallen considerably since hitting a peak of 3.8 percent in April 2022 but remain somewhat elevated relative to their pre-pandemic average of 2.0 percent," the Atlanta Fed says.
Firms' year-ahead unit cost uncertainty has come down some after a peak in July, it added. Presumably, that movement reflects the rise and fall of tariff fears.
In terms of the current economic environment, sales levels and profit margins"compared to normal" decreased after increasing last month. Year-over-year unit cost growth remained relatively unchanged at 2.3 percent, on average.
Companies' long-run unit cost expectations - five to 10 years ahead - remained relatively unchanged from March 2025 at 2.8 percent.
Of note, for September the Atlanta Fed asked companies about how potential changes in their competitors' pricing and changes in conditions would alter their pricing plan.
About half of the respondents said they would increase their prices by some amount in response to a 10-percentage point rise in competitors' pricing regardless of the condition given. However, when informed that cost or a shared impact of cost increases, disproportionate amounts of firms responded with plans to raise prices, it said.
Definition
The Atlanta Fed's Business Inflation Expectations survey provides a monthly measure of year-ahead inflation expectations and inflation uncertainty from the perspective of firms. The survey also provides a monthly gauge of firms' current sales, profit margins, and unit cost changes.
Description
The inflation expectations of firms are a critical component of the inflation outlook and provide guidance on the potential path of inflation. If firms expect that prices will increase at a given rate, their purchasing, pricing, and/or wage decisions will reflect this expectation, making the increase more likely to be realized.
Also important is the risk that firms attach to their inflation expectations. The methods the Atlanta Fed uses to compute firms' inflation expectations provide a direct measure of the subjective probabilities that firms assign to various inflation outcomes.
The FOMC judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Accurately gauging inflation expectations and uncertainties regarding these expectations are a key component of achieving this 2 percent target.
Other measures of inflation expectations are gleaned from consumer opinions, financial market instruments, and select industry groups (such as professional forecasters and purchasing managers), but there are no alternative measures of firms' inflation expectations.
When business expectations for inflation deviate from the FOMC's 2 percent target for inflation over the medium term (higher or lower than target), or when uncertainty about inflation runs higher than normal, it could be an early signal that the Federal Reserve is at risk of missing its price stability mandate. The inflation mandate is balanced against a goal of sustainable long-term employment growth.
Also important is the risk that firms attach to their inflation expectations. The methods the Atlanta Fed uses to compute firms' inflation expectations provide a direct measure of the subjective probabilities that firms assign to various inflation outcomes.
The FOMC judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Accurately gauging inflation expectations and uncertainties regarding these expectations are a key component of achieving this 2 percent target.
Other measures of inflation expectations are gleaned from consumer opinions, financial market instruments, and select industry groups (such as professional forecasters and purchasing managers), but there are no alternative measures of firms' inflation expectations.
When business expectations for inflation deviate from the FOMC's 2 percent target for inflation over the medium term (higher or lower than target), or when uncertainty about inflation runs higher than normal, it could be an early signal that the Federal Reserve is at risk of missing its price stability mandate. The inflation mandate is balanced against a goal of sustainable long-term employment growth.
