Atlanta Fed, Report: Estimates of Cost-Price Passthrough from Business Survey Data

“Our survey approach allowed us to measure passthrough in three complementary ways: based on reported backward-looking growth in costs and prices; based on expected forward-looking growth in costs and prices; and via a hypothetical scenario posed to business contacts, which allowed us to effectively shock respondents’ cost[1]growth expectations by a common amount and measure how their expected price growth would respond, thereby plausibly identifying the causal passthrough from costs to prices. All three methods produce cost-price passthrough estimates of around 60 percent. While this estimate is for the average passthrough, we document considerable heterogeneity in passthrough at the firm level, with most firms reporting a compression of margins over 2022 but some reporting passthrough that was greater than one-for-one.”