Key Takeaways
- The Philadelphia Fed’s monthly manufacturing survey showed employers face the highest costs since May 2022.
- In response, regional manufacturers raised their expectations for costs while lowering their projections for worker pay.
- The survey highlighted how businesses are encountering price pressures that they could pass on to consumers.
Things could be getting tougher for workers in the coming months, with prices rising and wages falling, according to a new survey of manufacturers.
The Philadelphia Federal Reserve’s monthly manufacturing survey for August showed that firms were facing higher prices for materials and, in turn, were raising prices for their finished products. Moreover, manufacturers in the district expect to start charging more and paying less, a reversal from just three months ago.
An index of prices paid by manufacturers rose to its highest reading since May 2022, according to the survey of manufacturing firms in Delaware and parts of New Jersey and Pennsylvania. The survey highlights how businesses across the economy are beginning to see tariff effects on prices they pay, and are likely to pass them on to consumers, economists said.
“Companies have consequently passed tariff-related cost increases through to customers in increasing numbers, indicating that inflation pressures are now at their highest for three years,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Price Pressures in the Pipeline?
Manufacturers indicated that more price pressures could be in the pipeline.
Firms said they expect to raise their prices by 4.1%, a larger projection than when they were asked the same question in May. These employers said that wages would go up by 3.5% over the same period, below the 4.0% from last quarter.
Meanwhile, a national industry survey by S&P Global showed that while the manufacturing and services industries both showed growth and increased hiring in August, prices also moved higher.
“While this upturn in demand has fueled a surge in hiring, it has also bolstered firms’ pricing power,” Williamson said.
The S&P Global survey showed that tariffs were the key driver of cost increases, with manufacturing costs rising at the second-steepest rate since August 2022.
Do you have a news tip for Investopedia reporters? Please email us at[email protected]
