As part of the Marck de Richmond Fed commercial surveys, we asked companies how pricing policies could affect their business. In addition, we asked the response companies to indicate their geographic footprint: urban, suburb, small town and / or rural. We were particularly interested in understanding how companies in rural areas expect to be affected by pricing policies compared to their urban counterparts. In our analysis, we consider that rural companies only work in rural areas or small cities. We consider that urban companies only work in cities or suburban areas.
We note that companies operating only in rural areas were more likely to expect significant impacts of prices that companies operating only in urban areas. However, rural companies were less likely to expect negative impacts than companies that operate in urban areas. Above all, rural companies were more likely to be manufacturers and this sector is likely to deal with more impact of prices.
Rural companies expect greater prices
Most respondents in our March investigation should be affected by prices. However, almost all 26 rural companies only that have responded should be affected (92%), compared to 77% of companies operating only in urban areas. More rural companies did not expect the impact to be significant compared to urban companies (31% against 20%, respectively).
When asked whether the impact of prices will be positive or negative for their business, few companies have indicated that the impact would be positive. More companies with an urban operation expected negative impacts of prices than rural companies (59% and 78%, respectively). However, around a third of rural companies did not expect the impact to be neutral, which is significantly higher than the expectations of companies operating exclusively in urban areas or companies operating in both types of fields.
Prices take into account the prices of all companies
Since the start of the year, less than half of companies operating only in rural areas or only in urban areas have adjusted their prices due to unforeseen costs. For those who adjusted prices, the increase in costs was mainly due to the increase in labor costs. Just over 20% of companies operating in rural areas indicated an increase in prices due to the cost increases in prices, which was similar to all geographies.
Looking at the three -month future, the majority of companies – regardless of the operating area – should increase prices due to unforeseen costs. The labor costs have remained an important factor in the expectations of the increase in prices, especially for rural companies. However, fewer rural companies should not increase prices over the next three months due to prices or commercial policy compared to companies and companies only in town planning that operate in the two geographies.
Industry structures help explain the impacts of prices
In a Recent regional issuesand a recent Economic memoryWe explored how manufacturers were more likely than uncompromising companies to expect prices impacts.
As is clear in the table below, half of the companies that responded to rural areas were manufactured, compared to 18% of urban companies and 28% of companies operating in both areas. The higher share of manufacturing in rural areas helps to explain why rural companies – on the basis of the analysis of this article – were more likely to expect significant impacts of prices than their only urban counterparts.
Conclusion
Rural and urban companies in the fifth district should be affected by prices. However, rural companies – which are more likely to be manufacturers – were more likely to expect significant prices impacts, although they are less likely to point out that these impacts would be significantly negative. The Fed of Richmond will continue to follow how our rural and urban companies are reproduced by the evolution of trade policy.
The opinions expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the system of the Federal Reserve.