Dive Brief:
- Inflation fueled by Iran’s war has pushed up costs, squeezed profits and caused companies to scale back investment and hiring plans, the National Business Economics Association said Monday, citing survey results.
- Almost half of respondents (48%) said the Iran war has hurt their business, with 44% saying input costs have risen and 24% planning to scale back investment and hiring plans, NABE said. One in three panelists (34%) ranked geopolitical hazards among the top three business risks.
- “There’s a little bit of caution here, a little bit of resilience, but a lot of concern about what’s going on geopolitically and with costs,” National Restaurant Association chief economist Chad Moutray said during a webcast, pointing to steady consumer spending but a “wait and see” stance among businesses.
Diving knowledge:
Anxiety about the damage from the Iran war has come up in other recent polls.
Economists see a 35 percent chance of a recession in the next 12 months, up from 32 percent in February and March, according to a Wolters Kluwer poll released Friday.
At the same time, 71 percent of economists believe higher energy prices will not put significant or extended pressure on so-called core prices, which exclude food and energy prices, Wolters Kluwer said.
The jump in oil prices since February will likely slow gross domestic product growth, Wolters Kluwer said, citing survey results.
“Higher energy costs are expected to offset fiscal support, slowing growth below trend for some time,” Wolters Kluwer said.
Brent crude futuresthe global benchmark, have soared about 49% since the start of the war on February 28, from $70 a barrel to $104 a barrel.
“Low- and middle-income consumers are really struggling right now, especially with gas at $4.50 cents a gallon,” Martha Moore, chief economist of the American Chemistry Council, said during the NABE webcast.
The U.S. economy is likely to expand 2 percent this year, compared with 2.1 percent last year, and the personal consumption expenditures price index is likely to rise 3.4 percent, well above the Fed’s 2 percent target, according to economists polled by Wolters Kluwer.
In the NABE survey, 50 percent of respondents rated the likelihood of a U.S. recession in the next 12 months at 26 percent or higher, up from 44 percent of respondents in a January survey.
Additionally, 44 percent of respondents said the Iran war has led to increased input costs for their businesses, according to NABE.
