More Companies Intend to Boost Prices Next Year, CFOs Report
More U.S. manufacturers are planning to boost revenue by raising prices next year, a survey of chief financial officers found Friday.
Sixty-three percent of 600 financial chiefs surveyed by Bank of America Business Capital said they planned to increase product prices in the next 12 months, compared with 37% a year ago. The prospect of higher prices helped prompt 81% of respondents to forecast higher revenue in 2005, compared with 72% who predicted greater sales in last year’s survey.
The annual survey was performed in October and targeted manufacturers with annual sales of $25 million to $2 billion.
Product makers are being squeezed by rising energy and other costs that they have been unable to fully pass onto consumers. Producer prices rose at a 5.2% annual pace from January through October, while consumer prices rose at only a 3.9% rate over the same period, according to Labor Department figures.
“Manufacturers are preparing for rising interest rates and expect increases in the cost of energy and raw materials,” said Mickey Levy, Bank of America’s chief economist. “They clearly plan to pass these costs on through price increases, which explains their positive outlook on top-line growth.”
The biggest concern voiced by the CEOs is the cost of materials, supplies and equipment. Eight out of 10 of the financial chiefs put those expenses at the top of their worry list, followed by energy costs and the health of the U.S. economy.
More than three-quarters of the manufacturers forecast the economy would grow next year, the highest percentage anticipating expansion in the survey’s seven-year history. Even so, they were less optimistic about their sector’s future. Forty-four percent expected the U.S. manufacturing industry to expand next year, compared with 53% in last year’s poll.
Business spending, which rose at a 13% annual rate in the third quarter, was expected to keep up the momentum next year, with 41% of survey respondents saying they planned to boost capital expenditures. That was up from 32% a year ago. The percentage of companies planning to participate in a merger or acquisition next year rose to 23% from 14%.
