Inflation: New York metro area retailers, service firms plan smaller price hikes this year

Retailers and other service firms in the metropolitan area are planning smaller price increases as their cost of doing business moderates compared with the hyperinflation of 2022, according to polls released on Wednesday.

Stores, professional service firms and other members of the service sector said they would hike their selling prices an average of 3.1% over the next 12 months, based on a recent survey by the Federal Reserve Bank of New York showed.

That compares with a price rise of 5.3%, on average, in the past year and 7.3% in 2022.

The smaller hike in selling prices comes as service firms predict their cost of doing business will rise 3.7% over the next 12 months, on average, after climbing 6.1% last year. The firms said their costs rose 11% two years ago.

“The pace of increase in costs, wages and prices have all slowed considerably over the past year,” New York Fed economists Jaison R. Abel and Richard Deitz said in a research note.  “Moreover, firms in the region expect cost and price increases, as well as the overall inflation rate, to moderate further in the year ahead.”

The bank polled about 200 service firms in the metro area and about 125 manufacturers across New York State between Feb. 2 and Feb. 9, with Long Islanders participating in both surveys.

The factories predicted they would increase the price of the products that they make by 2.8% over the next 12 months, on average, compared with last year's 3.2% hike. They raised their selling prices by 9.5% in 2022.

In terms of costs, manufacturers said they would climb by 3.6% in the next year, on average, compared with 4.7% in the past year. The manufacturers said their costs rose 13% in 2022.

Employee wages and benefits are among the largest costs, regardless of the type of business.

Both service firms and factories predicted wages and benefits would climb 3.8% in the next 12 months, on average, after rising between 4.3% and 5.3% in the past year. They increased 5.5% to 6.4% in 2022.

The New York Fed also asked the firms for a prediction about inflation as measured by the consumer price index.

Consumer prices in the 25-county region that includes Long Island were up 3.1% in January compared with a year earlier. That’s less than half the year-over-year rate of 6.7% in June 2022.

“After more than a year of moderating inflationary pressures, the overall inflation rate is now expected to be around 3 percent over the next year,” based on the surveys, Abel and Deitz said.

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.