WASHINGTON — The Atlanta Federal Reserve Bank's monthly survey released Wednesday showed businesses in the Sixth district raised their inflation expectations for the coming year to a 2.1% rate for unit costs, the highest monthly increase since the survey series began in October last year.

The survey also noted an increase in the expectation among businesses for prices increases over the next year due to labor costs, but sales levels were forecast as "now more likely" to put downward pressure on prices over the next 12 months.

The survey respondents' expectation of a 2.1% increase in unit costs is up from +1.8% in last month's survey, and businesses' inflation uncertainty also rose; up 0.1 percentage point to 2.6% in November.

Firms reported that unit costs had risen by 1.7% on an annual basis, up from their assessment of a 1.4% rise in October.

The survey was conducted November 12 to 16 with 198 firms responding to questions about their business conditions, inflation outlook, and potential pricing pressures.

The survey noted after some deterioration in sales levels and margins last month, both "held steady" in November.

On their inflation outlook, "Firms continue to anticipate little or moderate upward pressure coming from input costs over the next 12 months," the Atlanta Fed said.

However, the survey said firms' expectations for price increases due to labor costs over the next year rose in November, with the average likelihood of moderate to strong upward pressure in labor costs rising from 58% to 62%.

On the other hand, "firms indicated that sales levels are now more likely to put downward pressure on prices over the next 12 months," the Atlanta Fed said.

The survey included a special question aimed gauging businesses' year-ahead sales expectation and their uncertainty with regard to this expectation.

"On average, respondents projected sales levels to rise 1.2% over the next 12 months," the Atlanta Fed said. "Firms' sales forecast uncertainty was 2.8%."

Examining the data by sector, the Atlanta Fed said expectations varied widely, with manufacturers indicating the highest average year-ahead sales level expectation.

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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