Summary of Conference Call Notes Industry Overview - The conference call discusses the **US nonfinancial corporate sector** and its response to **tariff costs** and **inflation** trends in the context of the **US economy**. Key Points Economic Recovery and Tariff Impact - The Q3 US GDP report indicates that firms have made significant progress in recovering tariff costs by increasing output prices, which is expected to reduce downside risks to the labor market and lower recession probabilities, supporting a rebound in growth in 2026 [1][11] - Firms absorbed tariff costs in Q2 2025 by hiring less and experiencing reduced profitability, but in Q3 2025, they began to raise output prices, improving profitability [1][8][22] Price and Cost Dynamics - In Q3 2025, the price per unit rose more than nonlabor costs, indicating that firms successfully passed on tariff costs to consumers, which helped restore profitability [1][23] - The increase in unit nonlabor costs in Q3 was driven by higher production taxes and tariffs, which accounted for almost half of the increase [1][24][27] Profitability Trends - The corporate sector's ability to raise output prices by 1.2 cents per unit helped offset a 1.3 cents increase in unit nonlabor costs over two quarters, leading to moderate growth in profit per unit [1][30][32] - The data suggests that firms are likely to continue increasing prices into 2026, which could lead to firmer inflation but also help avoid layoffs [1][37] Future Outlook - The expectation is that the majority of the tariff pass-through to consumer prices will be completed by Q1 2026, assuming no further tariff policy changes [1][37] - The forecast includes a rise in core CPI and core PCE inflation rates to 3.0% and 2.9%, respectively, early next year, driven by tariff impacts [1][38] Behavioral Comparison - A comparison of corporate behavior during the pandemic and in Q2 2025 shows that firms previously responded to cost pressures by raising prices, whereas in 2025, they engaged in cost control measures, leading to slower employment growth despite solid economic activity [1][45] Additional Insights - Survey data indicates that many firms have not completed the pass-through process of tariffs to consumers, suggesting further price increases are anticipated [1][39] - The analysis highlights the importance of monitoring inflation trends and corporate pricing strategies as they relate to labor market conditions and overall economic health [1][11][37]