Most Fed districts reported inflation at a moderate-to-strong pace, with
readings higher than in the prior report. Energy costs tied to the Middle East
conflict were cited as the main inflation driver, spilling into shipping,
packaging, grocery and fertilizer. Non-labor input costs continue to rise faster
than selling prices, prompting broader concerns about margin compression;
pass-through ability is uneven, especially among consumer-facing firms. Firms
reported responses including supply-chain optimization, product adjustments,
reduced supply and temporary absorption of higher costs to sustain demand.
