Regional Contacts: Firms Report Rising Costs

October 24, 2018

photograph of a family standing together and talking to an agent at a travel check-in desk

Businesses across the Southeast are reporting rising nonlabor costs, and the most recent surveys show that firms expect their input costs to increase more quickly over the next year, according to the Federal Reserve Bank of Atlanta's new Beige Book reportOff-site link on regional economic conditions. Unit costs in September were up 2 percent over the past year, according to Southeast businesses in the Atlanta Fed's Business Inflation Expectations survey. Survey respondents said they expect costs to rise 2.2 percent over the next year.

infographic showing key findings from the October 2018 Beige Book

Overall, business contacts throughout the Southeast indicated that activity grew moderately from mid-August through September. This report does not account for the effects of Hurricane Michael, which struck the Florida Panhandle and southwestern Georgia in early October.

In other economic sectors, the Beige Book finds:

  • The labor market remained tight, as firms continued to face challenges finding enough workers and wage pressures increased.
  • Tourism contacts reported better-than-expected activity in recent weeks. Hotels were busier than anticipated in tourist magnets in Florida, Georgia, and Louisiana, and Mississippi casino gaming revenues rose compared to the same period last year.
  • Residential real estate contacts reported that sales activity is likely to be stable over the next few months.
  • The outlook for nonresidential and multifamily construction remained positive though uncertain, with the majority of contacts anticipating activity to match or exceed the current level.
  • Though credit quality metrics remained strong at financial institutions, many reportedly are loosening underwriting standards because of slowing demand for loans and heightened competition.
  • In the energy sector, many contacts said they responded to recently imposed tariffs by reorganizing supply chains. Meanwhile, advances in robotics and technologies to monitor control centers and pipelines continued to boost efficiency.
  • Contacts in agriculture remained concerned about tariffs and trade conflicts, although some contacts expressed optimism about the new United States-Mexico-Canada Agreement. Recent reports indicated cropland values in the Sixth District rose from 2017 to 2018 except in Florida, where values were flat.

The next Federal Open Market Committee meetingOff-site link is November 7–8.

photo of Charles Davidson
Charles Davidson

Staff writer for Economy Matters