Around half of the firms that changed their prices more often than they usually do expect to make more-frequent-than-normal price increases over the next 12 months. But signs indicate that pricing behaviour is moving toward normal. About one-third of firms that adjusted their prices by an unusually large amount in the past 12 months said the size of their price increases will be close to normal within the next 12 months. Businesses anticipate that the rate of input cost growth will slow after having increased significantly over the past year. This is particularly the case for:
- wages
- commodities and related inputs
With lower cost increases to pass through to customers, firms across all regions and sectors expect their output prices to grow at a slower pace. Further, a continued softening in demand conditions is creating an environment where firms are less able to pass through input cost increases.
Demand has slowed and outlooks remain subdued
Businesses reported that demand has slowed, contributing to weak sales growth over the past year. The share of firms citing outright declines in their sales also increased notably—one-third of respondents said their sales have fallen over the past year. The slowdown in demand is widespread across regions and sectors.
Firms expect growth in demand to continue to be subdued, with indicators of future sales (e.g., order books, sales inquiries) low relative to their historical norms (Chart 4). At the same time, the share of firms planning for a recession in the coming year—about one-third—has not risen.