Business Conditions Survey

May 2026
NABE Survey Results Show Costs Have Risen Amid Middle East Conflict, Constraining Profits and Dampening Plans for Investment and Hiring

COMMENTS: “The latest NABE Business Conditions Survey results indicate that while a majority of respondents expect stable profits over the next three months, only 13% expect profits to rise—the lowest share since 2023,” said NABE President Gregory Daco, chief economist, EY-Parthenon, Ernst & Young LLP. “More than two-thirds of respondents report rising materials costs over the past three months, the largest share since 2022, while 44% note that costs have risen moderately to significantly. To date, nearly half of respondents report a negative business impact from the conflict, with nearly one-quarter reporting plans to scale back investment and hiring over the next six months.”

“Sales over the past three months were steady, but materials costs increased and profit margins declined,” added Survey Chair Martha Moore, chief economist and managing director, American Chemistry Council. “Looking ahead, expectations softened across several indicators in the May survey, including sales, capital spending, and employment. Also, expectations for prices and costs have accelerated compared to previous surveys. Recession odds are slightly higher than they were in the January survey.”

HIGHLIGHTS

• Sales resilience is tempered by softer expectations. Sales activity remained generally resilient over the past three months, although forward-looking sentiment cooled. Forty-eight percent of respondents report higher sales—up from 42% in the January survey—while 35% indicate there was no change, and 17% note declines. Looking ahead, 45% of panelists expect sales to increase over the next three months, down from 56% in January. Meanwhile, 43% anticipate stable sales, and 13% foresee declines—the largest share since July 2025.

• Profit outlook is also strained. Panelists’ expectations point to continued margin stress. While 56% of respondents  anticipate margins will hold steady, 13% expect profits to improve—that percentage share is the lowest since October 2023. Nearly one-third (31%) of the panel believes profitability will weaken in the coming months.

• Nearly half (48%) of respondents says that the conflict in the Middle East has negatively impacted their businesses. In contrast, 8% of respondents indicate that the conflict has had a positive impact on their businesses. Forty-four percent report that their businesses have experienced little or no impact.

• Nearly half of panelists reports higher input costs related to the Middle East conflict. Forty-four percent of  respondents say that compared to six months ago, input costs had increased as a result of the Middle East conflict. More than one-third (34%) report little or no change, and 22% say that it was too soon to tell or not applicable. No respondent indicates that input costs had decreased.

• Energy prices, input, or transportation costs are cited by a majority (54%) of panelists as effects of the Middle East conflict on their businesses. Twenty-six percent cite both domestic demand and financial market volatility, while 20% indicate that supply-chain disruptions were affecting their businesses. Eight percent cite labor market conditions, and 6% report export demand/foreign sales as transmission channels. Twenty-eight percent say that the effects were not applicable.

• Recession odds tick higher. One-half (50%) of respondents puts the probability of a U.S. recession at 26% or higher, up from the 44% share in the January survey. Forty percent of panelists assess the probability of the U.S. entering a recession over the next 12 months between 26% and 50%, higher than in January’s survey. Six percent put the probability between 51% and 75% (down from January). Four percent of panelists put the odds of recession between 76% and 100%, up from zero in the January survey. Two percent of respondents say that the economy is currently in a recession.