A key signal for future inflation eased in the past month, suggesting that businesses see the latest surge in prices as temporary.
The Federal Reserve Bank of Atlanta’s monthly survey of where businesses see inflation going showed the median expectation is for unit costs to rise 2.3 percent over the coming year, down from 2.4 percent a month earlier. The survey of hundreds of businesses in six states was released on Wednesday.
A year ago, businesses said they expected costs to rise 2.4 percent. In June of 2024, the expected inflation was 2.3 percent.
Business expectations for inflation are seen by some economists as important indicators of the likely movement of prices. Such expectations can be self-fulfilling because businesses set their own prices and build business plans around where they expect prices to go.
When asked to look back over the past 12 months, businesses said their own costs increased around 2.4 percent, which is what they forecast a year ago. This means that they expect slightly less inflation over the next year than they expected and experienced over the past year.
Consumer expectations for inflation are also falling. The University of Michigan’s consumer sentiment survey found that expected inflation over the next twelve months edged down to 4.6 percent from 4.8 percent.
The decline in gasoline prices are likely helping ease inflation concerns. The national average has declined from more than $4.50 a gallon at this time last month to $4.02 today.
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