US Companies Absorb Oil Price Shock with Minimal Demand Impact

A recent Federal Reserve survey of chief financial officers (CFOs) found that most companies in the US have absorbed the shock of high oil prices without significant impact on demand.

The quarterly survey, conducted from May 18 to June 5 by the Richmond and Atlanta Fed banks in conjunction with Duke University's Fuqua School of Business, polled over 500 firms nationwide. While CFOs cut their expected US economic growth to 1.8% from 2.1%, firm-level optimism rose, and hiring plans remained steady.

Despite oil prices spiking due to the war against Iran, only one-third of firms reported raising prices in response to increased unit production costs. Two-thirds said the oil shock had indeed increased their unit costs, but over 70% stated that demand for their goods and services had not changed much or actually increased.

Brent Meyer, an Atlanta Fed vice president, noted that if oil futures markets are correct and prices remain around $90 a barrel, it's unlikely to be a significant inflationary impulse. However, he cautioned that it's too early to draw conclusions until oil prices stabilize.