US Companies Absorb Oil Price Shock Without Significant Demand Impact

The recent Federal Reserve survey of chief financial officers (CFOs) showed that most US companies were able to absorb the shock of rising oil prices without significant impact on demand. The survey, which covered over 500 firms nationwide, found that only one-third of CFOs reported raising prices in response to higher energy costs.

The survey results also revealed that firm-level optimism has risen, while hiring plans remain steady. However, expected US economic growth has been revised downward to 1.8% from 2.1%. This reduction is attributed to the recent spike in oil prices, which had prompted fears of stagflation last spring.

Fed policymakers are concerned that inflation may be more persistent than previously thought, with some anticipating a rate increase as soon as the September meeting. The Personal Consumption Expenditures price index is expected to show an 4.1% rise in May, exceeding the central bank's 2% target.

Brent Meyer, an Atlanta Fed vice president, noted that if oil prices remain around current levels, it would be 'good news' and suggest a easing of energy's contribution to inflation over time.