The Iran war delivered a quick, though relatively contained, negative impact to US activity data and surveys.
By March, CPI inflation recorded its largest monthly increase since 2022 and reached +3.3% y/y (+0.9 pp) – almost entirely on the back of gasoline prices, with the non-energy index remaining virtually stable.
Business sentiment, which was on an upward trajectory before the shock, stayed resilient but signalled a faster input-price growth (a leading indicator of inflation) and longer delivery times, both directly linked to Middle East turmoil and coming on top of the issue of tariffs.
Meanwhile, the outlook of households, which were already low on optimism, has further deteriorated, while inflation expectations were rising.
However, macro conditions are significantly less inflationary than in 2022, and small businesses have not yet raised their price plans.
