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Discussion Paper
Are Recession Fears Replacing Supply Chain Challenges? Evidence from Fifth District Business Surveys
The last year and a half have been fraught with persistent supply chain challenges, the highest rate of inflation since the 1980s, and record levels of job openings and quits. As such, it is not surprising that in the Richmond Fed's May monthly business surveys, the top three concerns across all Fifth District firms surveyed were inflation, supply chain disruptions, and availability of labor. This was corroborated by national data collected as part of the second quarter release of the Richmond Fed's CFO Survey.
Briefing
Predicting PCE Using the Richmond Fed Price Measure
The Richmond Fed survey measure of price changes comes out a month earlier than the PCE measure of inflation. Because the Richmond Fed price measure is known earlier, we can use the contemporaneous measure to provide an estimate of inflation.An empirical model with contemporaneous and past inflation changes — as measured by the Richmond Fed's price survey — notably reduces the out-of-sample forecast error obtained from a benchmark random walk model of inflation.Using the Richmond Fed price survey data prior to the release of September PCE, we forecast September PCE inflation to move from ...
Discussion Paper
The Impact of Tariffs on Our Region's Firms
Given recent changes in U.S. tariff policy, we asked Fifth District firms how they expected to be affected by tariff policy in March. At the time, 80 percent of respondent businesses expected to be impacted. In our May surveys, we checked in with firms and found that 72 percent of respondents made business changes in response to tariffs on imports. Firms reported taking a variety of actions. Of the firms that reported making adjustments, most have or plan to increase prices, 47 percent have canceled or delayed capital expenditures, and 41 percent have adjusted hiring plans.
Discussion Paper
Are Customers Pulling Back on Spending? Evidence From the Richmond Fed Business Surveys
In the last few years, consumer spending in the United States has been remarkably resilient. In our August business survey, we sought to understand if Fifth District firms have recently experienced softening demand for their goods or services. A majority of firms reported that over the past three months, customers decreased the amount of goods and services purchased — both in quantity and in dollar amount. The survey also found that demand has softened more for manufacturers and retailers than firms in other industries. Additionally, firms reported that lower-income customers pulled back on ...
Discussion Paper
Are Capital Expenditures Getting Too Expensive?
Capital expenditure (CapEx) is business spending used to acquire, improve, and maintain physical assets, such as buildings and machinery. These projects often require extensive planning because once in motion, they tend to be expensive, drawn out, and costly to stop. As such, a firm's willingness to undertake capital expenditures can be indicative of its future economic outlook. For example, a retail business may be less likely to invest in opening a new storefront if it's pessimistic about future demand for its product. In our monthly Fifth District surveys, we regularly ask firms if they ...
Discussion Paper
Tariff Cost Pass-through Among Fifth District Firms
With tariffs top of mind for many firms in the Fifth District, the Richmond Fed's August business surveys sought to understand how firms have reacted to changing trade policy. As we saw in our March surveys and May surveys, firms continued to report heightened uncertainty around tariff policy. For some, this uncertainty has led to concerns about earnings and the effects on customers. One commercial laundry machine manufacturer stated, "We cannot predict cost for products, which means we have no idea as we sign contracts if we will be able to build the equipment and cover costs or make ...
Discussion Paper
The State of Hiring in the Fifth District
The past two years have been marked by a historically tight labor market in which many firms have had difficulty hiring and retaining workers who possess the necessary skill sets. In a recent post, we explored evidence from our business surveys that suggests that the labor market may be cooling somewhat. Our employment and availability of skills indexes have returned to pre-pandemic levels, and our estimates of wage growth have come down from their 2022 peak. Nonetheless, wage growth estimates remain above pre-pandemic levels, and data from our August surveys suggests that many firms are ...
Discussion Paper
How Might Fifth District Firms React to Changing Tariff Policies?
In March 2025, the U.S. implemented a 20 percent tariff on all imports from China and an additional 25 percent tariff on all steel and aluminum imports. The administration has also announced additional 25 percent tariffs on goods imported from Canada and Mexico to be implemented in April 2025 and proposed a set of tariffs targeting the European Union and automotive imports.In order to better understand how these implemented and proposed tariffs might affect firms in the Fifth District, we included questions about the impact of tariffs in our March business survey, which was fielded from Feb. ...
Discussion Paper
Inflation Expectations of Fifth District Firms
In early 2021, inflation in the U.S. began to climb, with the Consumer Price Index (CPI) peaking at 9 percent on a year-over-year basis in 2022. Since then, inflation has come down considerably. In July 2021, we started to monitor the inflation expectations of respondents to our Fifth District business surveys. We saw expectations rise along with inflation and then start to fall.In the most recent April survey, we find that most firms are following inflation. Firms' expectations for CPI growth in the next year and the next five years have increased again to levels similar to October 2023. ...
Briefing
Tariff Update: Incorporating the April 9 Announcements
This article updates our previous analysis covering the potential effects of announced tariffs by the U.S. As the analysis is quite similar to our previous analysis, much of the text of the article is drawn from the previous article.In our April 2 article examining recent tariff announcements, we constructed a benchmark measure of the average effective tariff rate (AETR) based on detailed trade data for 2024. The analysis quantified the fiscal and trade effects of newly proposed tariffs through a series of counterfactual scenarios. These included tariffs on aluminum and steel, renewed duties ...