Businesses in Southeast watching inflation

Wednesday, Sept. 19, 2012 1:18 PM
Last updated Friday, Sept. 21, 2012 8:02 AM
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Editor's note: An earlier version of this story provided an incorrect inflation number.

ATLANTA - Business owners and executives in the Southeast seem slightly more optimistic that inflation won't worsen, according to a survey by the Federal Reserve Bank of Atlanta released Wednesday.

The average rate predicted by the business owners and executives surveyed was 1.7 percent, down from 1.9 percent in last month’s poll.

Those questioned are also more certain about their expectations, and they reported already having to pay 1.3 percent more for what their business needs than they did last year.

The Fed conducted the survey Sept. 10-14 among 192 firms.

Although the survey report didn’t mention it, the Fed’s own policies could be fueling the anticipation of greater inflation. The central bank has begun what economists call “printing money” by buying long-term mortgage investments in an effort to hold interest rates low.

Such efforts to increase the money supply generally create inflation while they also boost the availability of cash for employers to borrow in expanding their business and adding to their payroll.

Those employers surveyed might appreciate the economic stimulus even if it brings some inflation since the poll shows they’re experiencing weakness now.

“According to the businesses surveyed, firms continue to operate in an environment of below-normal sales levels and profit margins, however, both showed improvement in September,” according to the bank’s report. “Projecting ahead, firms continue to anticipate little or moderate upward pressure coming from input costs over the next 12 months.”

Smaller firms are struggling to cope with depressed sales than larger ones, the survey found.

On average, the companies said their sales are 7.6 percent below normal, but firms with fewer than 500 employees were 9.6 percent lower while larger firms gauged the sales gap at just 4.9 percent.

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