A quarterly survey of more than 500 chief financial officers across the United States, conducted by the Federal Reserve Banks of Richmond and Atlanta in partnership with Duke University's Fuqua School of Business, has shed light on how businesses are handling the recent surge in energy costs. The findings suggest that while most companies felt the pinch, they have so far chosen to absorb the hit rather than pass it on to customers.
Two-thirds of respondents reported higher unit costs, yet only about one-third actually raised prices. Over 70% said demand remained unchanged or even increased, pointing to still-resilient consumer spending. However, CFOs trimmed their forecast for U.S. economic growth to 1.8% from 2.1% in the prior poll, while keeping their own hiring plans steady.
What the Survey Reveals About Corporate Behavior
The survey indicates that many companies are squeezing their profit margins to avoid scaring off customers. By renegotiating with suppliers, cutting discretionary spending, or simply accepting lower profits, they have managed to keep prices stable for now. This is a classic response to a temporary cost shock, but it has limits.
Atlanta Fed vice president Brent Meyer noted that if crude oil settles closer to $70–75 per barrel, energy may not add much to inflation from here. The survey itself was based on an assumption of $90 oil. But the catch is what happens if input costs jump again. With underlying inflation still running warm, any faster pass-through from business costs to consumer prices would complicate the Fed's rate path and keep markets sensitive to data.
CFOs also penciled in roughly 4.7% increases in both costs and prices for this year, suggesting they expect to eventually pass along some of the burden. The key variable is energy: if oil prices drift lower, pressure stays concentrated in margins and tends to fade. If costs reaccelerate, inflation could pick up faster than recent prints imply.
What It Means for Investors
For everyday investors, this survey offers a window into the dynamics that could drive inflation and interest rates in the months ahead. The current situation is what Meyer calls a “fewer levers left” economy: companies have already used their easiest cost-saving measures. Once those are exhausted, the next rise in unit costs is more likely to show up in prices, nearly one-for-one.
That creates a more nonlinear inflation backdrop. If energy costs keep drifting lower, the pressure stays on corporate profits but doesn't necessarily show up in consumer prices. But if energy costs reaccelerate—for example, due to geopolitical tensions like those seen in recent energy stock surges after Iran strikes—inflation could pick up faster than recent data suggests. That would shift expectations for the Federal Reserve's next move, potentially leading to higher interest rates for longer.
Investors should watch energy prices closely. If oil stays low, the margin squeeze may continue but inflation fears could ease. If oil jumps, expect markets to quickly reprice rate expectations, which could hit growth stocks and bonds hardest. The survey also highlights why energy-sensitive sectors, such as those involved in energy platform deals, remain in focus.
Overall, the message is clear: businesses have absorbed the first shock, but their capacity to do so again is limited. The next move in energy costs could have an outsized impact on inflation and the economy, making it a key variable for investors to monitor.
