Core Summary

  • A survey released Monday by the National Association for Business Economics (NABE) showed that inflation triggered by the Iran war has raised corporate costs, squeezed profit margins, and prompted companies to scale back investment and hiring plans.
  • The survey showed that 48% of respondent companies said the Iran war had harmed their business, 44% reported higher input costs, and 24% planned to lower investment and hiring expectations. In addition, 34% of respondents listed geopolitical risk as one of their top three business risks.
  • "There is a bit of caution, a bit of resilience, but more concern about the geopolitical situation and costs," Chad Moutray, chief economist at the National Restaurant Association, said during a NABE webcast. He noted that consumer spending remains stable, but businesses are adopting a "wait-and-see" stance.

In-Depth Analysis

Other recent surveys also reflect concerns about the negative impact of the Iran war. A survey released last Friday by Wolters Kluwer showed that economists expect a 35% probability of a recession in the next 12 months, up from 32% in February and March.

Meanwhile, Wolters Kluwer noted that 71% of economists believe higher energy prices will not put significant or sustained pressure on core prices, which exclude food and energy prices.

Citing the survey results, Wolters Kluwer said the surge in oil prices since February could weigh on gross domestic product (GDP) growth. "Higher energy costs are expected to offset fiscal support, keeping growth below trend for some time," Wolters Kluwer said.

Since the outbreak of the war on February 28, global benchmark Brent crude oil futures have surged from $70 per barrel to $104, an increase of about 49%.

"Low- and middle-income consumers are really struggling right now, especially with gasoline prices above $4.50 per gallon," said Martha Moore, chief economist at the American Chemistry Council, during the NABE webcast.

According to forecasts from economists surveyed by Wolters Kluwer, the U.S. economy may grow 2% this year, down from 2.1% last year; the personal consumption expenditures (PCE) price index may rise 3.4%, well above the Federal Reserve's 2% target.

In the NABE survey, 50% of respondents put the probability of a U.S. recession in the next 12 months at 26% or higher, up from 44% in the January survey. Additionally, NABE data showed that 44% of respondents said the Iran war had raised their companies' input costs.