Discussion Paper

Fifth District Firms and the Prospect of Higher Input Prices

Abstract: Since the middle of 2023, firms' year-ahead input price growth expectations have been relatively steady, hovering around 3 percent for manufacturers and between 4 to 5 percent for service providers. However, recent developments in trade and tariff policy have introduced new uncertainty into firms' decision-making. In December, our surveys showed little evidence that this uncertainty had made its way into firms' price or cost growth expectations. Data from our February surveys show a slight uptick in firms' expected growth in the prices they pay their suppliers. In addition to the slight uptick in expected growth, most respondents in February reported that in the event of an unanticipated increase in input costs, they would increase the prices they charge customers. The share of the cost increase that firms would pass on to customers varied, with manufacturing firms more likely than service-sector firms to pass on the entire cost increase. Despite their expectation to pass along price increases, most firms acknowledged that it is either as difficult or more difficult to pass on price increases to their customers this year than it was last year.

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Regional Matters

Publication Date: 2025-02-25