March 2026 NFFS Economic Advisor Now Available
March 2026
The March 2026 issue of the NFFS Economic Advisor by ITR Economics is now available for NFFS members.
FEATURED ARTICLE
A Closer Look: The U.S. Economy - War, Oil, and Broader Energy Markets
by John Olson, ITR Economics
What you need to know: Oil Prices will eventually settle, but overall energy costs are pinching businesses and consumers
War in the Middle East has once again reminded consumers and businesses how quickly geopolitical strife can ripple through the global energy system. In late February and early March, attacks on infrastructure and threats to shipping in the Strait of Hormuz sent US Crude Oil Spot Prices sharply higher. For US consumers, the first noticeable effect has been costs at the pump. Higher crude oil prices feed directly into higher gas prices. In December, US Regular Gasoline Prices were below $3/gallon. Since the start of the conflict, prices have jumped to $3.72 for the week ending March 16. While spending on fuel makes up a lower percentage of overall personal consumption expenditures than in years past, the need to increase energy-related expenditures may spell spending cuts in other areas, especially for already-squeezed lower-income consumers.
Energy — Not Just Oil — Is Getting More Expensive
Focusing solely on prices at the pump, however, misses the broader story. Oil price shocks are occurring at a time when consumers and businesses are already contending with higher prices for energy in other areas. The cost of electricity is rising, with February data showing a 4.8% ascent in consumer electricity prices over the last 12 months. Utilities are investing heavily in grid modernization, renewables, and transmission infrastructure to support the ongoing energy transition. Meanwhile, rising demand from data centers, electrification of vehicles and heating systems, and industrial sector reshoring adds additional pressure on the grid. The result is sharp rise in electricity costs since the onset of the pandemic. The annual US Average Price for Electricity has risen nearly 40% since 2020, after remaining relatively stagnant in the decade prior.
These higher costs trickle pervasively through the economy. Everything takes energy, from driving a car, to manufacturing goods, to running a service business. Higher input costs in all these areas will lead to higher prices across the economy, contributing to consumers being squeezed further. So, while the war in Iran may be less a singular driver of energy inflation and more a reminder of the connectivity of commodity markets, squeezed consumer spending will add to elevated uncertainty in the US economy.
Oil markets will likely move back, but not all the way back, toward the pre-war level once geopolitical tensions ease. Nevertheless, the broader trajectory of higher electricity demand, significant grid investment, and tighter global energy systems suggests that volatility and upward pressure on energy costs will remain a defining feature of the US economy in the coming years.
So, what can you do to mitigate this threat of profitless prosperity? There are a few options. Investment in more energy-efficient machinery can lower your marginal costs. Investing in research and development to reduce waste and increase efficiencies is another. Locking in energy costs is something to consider, but we generally recommend waiting until more favorable terms are available at the bottom of the business and price cycle, likely in 2027. Finally, some businesses are investing in on-site energy generation, which provides a more stable platform to plan your energy costs. Consider implementing one or more of these strategies into your business.
Also in this month's Advisor:
- ITR's Macroeconomic Outlook: "Economic conditions remain broadly stable, though the balance of risks has shifted modestly in recent weeks. Underlying demand remains resilient, but softer income data and renewed geopolitical pressures have introduced more uncertainty into the economy."
- Make Your Move: "While real personal incomes are rising, we are watching the recent muted growth trend, particularly given recent upside pricing risks. Closely monitor energy price volatility and its potential impact on nearterm costs and consumer purchasing power."
- Investor Update: "The macroeconomic and financial risk of higher oil prices is less in the increase itself and more in the broader context of softening growth in real personal income, which limits consumers’ ability to absorb rising energy costs. Our analysis of prior instances where oil prices jumped more than 20% over a five-day period suggests that the primary negative impact on financial markets is isolated to the near term."
- ITR Economics' Long Term View: "2026 - Growth, 2027 - GDP Growth; Manuf. Flat, 2028 - Growth"
- Leading Indicator Snapshot: "Largely mild and sometimes inconsistent rise in our system of leading indicators supports our outlook for mild growth ahead for many sectors of the economy. • The ITR Retail Sales Leading Indicator™ calls for further rise in consumer spending; however, slowing growth in real income paints a picture of mild, not robust, rise. • Focus on areas of the economy that will benefit from uncertainty, a price-sensitive environment, or secular tailwinds; defense, consumer staples, and areas that directly or indirectly benefit from AI-related investment (such as electrical equipment) are examples of this."
- Manufacturing Industry Analysis: "US Total Manufacturing Production in the 12 months through February was 1.3% above the year-ago level. Efforts in electrification and digital infrastructure are likely to support growth in related manufacturing sectors. Upcoming rise will be understated given mild macro headwinds"
- State-by-State: Employment: "US Total Nonfarm Employment in the 12 months through February was 0.4% above the year-ago level; it is slowing in growth. While job creation is on the more sluggish side, many metrics are pointing to a relatively stable environment. The rate of private layoffs has plateaued in recent months after mildly rising for the past 3.5 years, and it remains historically low, at 1.25% in the 12 months through January. In the 10 years pre-COVID, the rate averaged 1.44%. While Employment is in a broad growth trend in the US, Maine (-0.3), the District of Columbia (-1.5%), Iowa (-0.1%), and West Virginia (-0.1%) are all undergoing mild contraction. Slowing growth in Employment is not necessarily cause for concern for the broader economy. Heightened uncertainty is likely playing a role, as opposed to fundamental weakness."
- Reader's Forum: "I’m hearing mixed messages about the housing market regarding price trends. What’s the real story?" Haley Sienkiewicz, Economist at ITR Economics™, answers:
Learn more at the NFFS Economic Portal
Don't forget to visit the NFFS Economic Portal, an all-in-one platform that provides a wealth of economic insights and invaluable resources to help members navigate the ever-changing business landscape. In the portal this month:
- Manufacturing Momentum: Economic Trends Driving the Industry
- Preparing for the 2030s: Key Questions Leaders Are Asking
- Oil Prices and the Economy: Forecast, Consumer Risk, and Inflation Impact