WASHINGTON — The Atlanta Federal Reserve Bank's monthly survey released Wednesday showed businesses in the Sixth district slightly raised their inflation expectations for the coming year to a 1.9% rate for unit costs, with the expectation that non-labor costs will exert a moderate-to-strong upward influence on prices in the coming year.

The survey also noted that after a slight decline in sales levels and profit margins last month, firms are now reporting that levels are still below normal in February.

The survey respondents' expectation of a 1.9% increase in unit costs over the next 12 months is up from +1.8% in last month's survey, but businesses' inflation uncertainty was unchanged at 2.4% in February.

Firms reported that their unit costs had risen by 1.7% compared to February last year.

The survey was conducted February 4-8 with 199 firms responding to questions about their business conditions, inflation outlook, and potential pricing pressures.

In last month's survey, respondents had indicated that sales levels and profit margins "declined somewhat." Now, they note that "sales levels and profit margins remain well below normal."

The Atlanta Fed includes a question in its survey every quarter regarding factors influencing inflation. This time around, firms expect sales levels to put "significantly more upward pressure" on prices over the next 12 months, but anticipate little to no influence or moderate upward influence on prices from labor costs.

"Expectations for non-labor costs (including materials, commodities, and transportation) lean more toward moderate to strong upward influence," the Atlanta Fed added, while most firms do not expect changes in productivity or margins to significantly impact prices over the next 12 months.

On the question about the frequency of firms' price changes — whether daily, weekly, monthly, quarterly, semiannually, annually, and less often than annually — the Atlanta Fed said 33%, the largest proportion, of products and/or services change prices only annually.

"By industry, we note that goods and services sold by manufacturers adjust prices considerably less frequently than those sold by retailers," it added.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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