Eighth District Firms Expect Slight Acceleration of Price Pressures in 2025

To gain a deeper understanding of current economic conditions, the Federal Reserve Bank of St. Louis conducts a quarterly survey of businesses in the Eighth District.Headquartered in St. Louis, the Eighth Federal Reserve District covers all of Arkansas, most of Missouri, and parts of Illinois, Indiana, Kentucky, Mississippi and Tennessee. The results of the survey are regularly reported in the St. Louis Fed’s contribution to the Beige Book report on national and regional economic conditions.The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve districts. The link connects to the St. Louis Fed’s summary within the Beige Book. The St. Louis Fed has conducted this survey on a quarterly basis since May 2014. In addition to the standard questions, the St. Louis Fed includes a series of questions on timely topics or areas of specific importance. Since 2018, the St. Louis Fed has included a series of questions on pricing decisions each February. The latest survey was conducted between Feb. 4 and Feb. 14, 2025; there were 156 responses. With elevated rates of inflation in the economy and widespread interest in factors driving current inflation, this blog post takes a closer look at the survey results pertaining to firms’ pricing changes and expectations for the remainder of 2025.

In the St. Louis Fed’s quarterly survey conducted in February of 2023, 2024 and 2025, firms were asked to provide an estimate of the growth rate of (i) the average prices they charged customers in the previous year and (ii) the average prices they planned to charge in the year ahead. These results are summarized in the table below, along with comparable results from the national CFO SurveyThe CFO Survey is conducted through a partnership between Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. These survey results are not weighted by firm size or sector; the initial sample is intended to reflect the industry mix of the Eighth District economy. as well as economic data from the Bureau of Labor Statistics (BLS). The realized data for each period are the latest available as of February 2025, and forecasts are as of February 2023, February 2024 and February 2025.

The table shows that, on average, District firms surveyed this February reported that prices charged to customers increased 2% in 2024; this was a smaller increase than in the previous year but above the expected increase of 1.5% at the beginning of 2024. The St. Louis Fed survey average is lower than CPI inflation and higher than PPI inflation for 2024; this is to be expected as our panel comprises firms selling to other firms as well as directly to consumers.

Looking forward over the next 12 months, all the projections show a different trend from those in previous years: Price pressures are expected to slightly accelerate in 2025. However, the magnitude of the increase in price pressures this year varies by source. The St. Louis Fed survey’s expected inflation rate increased by 0.5 percentage points, going from 2.0% to 2.5%. The CFO Survey indicates, on average, a higher level of inflation expectations at 3.6%. Professional forecasters, though, anticipate inflation rates will increase, with CPI inflation rising from 2.7% in 2024 to 3% in 2025 and the producer price index inflation accelerating from 1.8% to 2.8%.

Passing Costs onto Customers

Despite the progress made toward 2% inflation over 2024, survey respondents expect this trend to reverse slightly in 2025. The survey suggests firms are maintaining some power to pass price increases onto customers.

The figure below provides the firms’ responses when asked about their overall ability to increase prices charged to customers in the past three to six months and their expectations in the next three to six months. In the 2025 survey, the share of respondents noting an improvement in their ability to increase prices over the past three to six months declined from 25% in 2024 to 13%.In the agriculture sector, the majority of respondents indicated no ability to increase prices charged to customers. However, expectations for the next three to six months moved in the opposite direction, revealing that 71% of respondents expect at least some ability to increase prices over the next three to six months, a slight increase from 66% in 2024.

Which of the Following Best Describes Your Ability to Increase Prices Charged to Customers?

SOURCE: St. Louis Fed.

It is worth noting that despite this slight increase in expectations of higher prices for customers in 2025, the situation looks very different from the high inflation period in 2022, when about 40% of respondents indicated that their ability to increase prices had improved during the past three to six months and over 80% of firms expected at least some ability to increase prices charged to customers over that year.

Notes

1. Headquartered in St. Louis, the Eighth Federal Reserve District covers all of Arkansas, most of Missouri, and parts of Illinois, Indiana, Kentucky, Mississippi and Tennessee.
2. The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve districts. The link connects to the St. Louis Fed’s summary within the Beige Book. The St. Louis Fed has conducted this survey on a quarterly basis since May 2014. In addition to the standard questions, the St. Louis Fed includes a series of questions on timely topics or areas of specific importance. Since 2018, the St. Louis Fed has included a series of questions on pricing decisions each February. The latest survey was conducted between Feb. 4 and Feb. 14, 2025; there were 156 responses.
3. The CFO Survey is conducted through a partnership between Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. These survey results are not weighted by firm size or sector; the initial sample is intended to reflect the industry mix of the Eighth District economy.
4. In the agriculture sector, the majority of respondents indicated no ability to increase prices charged to customers.