Flexibility and planning are critical as economic forces impact businesses

What happens to a business owner’s risk profile when the cost of nearly everything they build with jumps almost 10% in a single year? That’s not a hypothetical. It’s the reality many businesses are living through right now. 

As we cross the mid-year mark, the data tells a clear story: volatility is a major factor and long-range planning is essential. Influences such as climbing inflation, rising raw material costs, and a handful of converging geopolitical and policy forces are squeezing margins across nearly every industry that touches metal, fuel, or freight.  

It’s not all headwinds, though, and there are positive aspects such as: 

• Job growth – The U.S. economy has added an average of 114,000 jobs per month and nonfarm payroll growth was 172,000 in May. Meanwhile, the unemployment rate has held steady at 4.3%. 

• Economic resilience – The U.S. economy has remained resilient despite volatility. Nearly two-thirds of the country’s economic activity is tied to consumer spending and this activity has continued to fuel the economy. 

• Tax incentives – New policy changes that took effect this year have introduced some incentives and helped create larger tax refunds that has helped drive economic activity in the first half of the year.  

The mid-year economic landscape and what’s driving costs

Volatility has been a hallmark of 2026. Inflation has picked up again in 2026 due to supply chain disruptions. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index for all items rose 4.2% over the 12 months ending in May 2026, up from 3.8% the month prior. 

The single biggest culprit? Energy. 

• Energy prices climbed 23.5% year over year. 

• Gasoline surged 40.5% over the same period. 

• Fuel oil jumped 58.9% year over year. 

In May alone, energy accounted for more than 60% of the entire monthly increase in the monthly “all items” index. That rise can ripple into everything from transportation to manufacturing. 

Some of the chief forces are working together to push raw material and operating costs up include:

1. Geopolitical conflict and energy shocks 

The conflict involving Iran has disrupted global energy markets and shipping lanes. Crude petroleum prices rose 11.8% in May, and the instability around the Strait of Hormuz has pushed up freight costs and delivery timelines. 

When shipping routes constrict, carriers add surcharges and reroute vessels around entire regions. That means longer lead times and higher costs for any business importing goods or materials.

2. Tariffs on key inputs 

Tariffs continue to drive up the price of materials that businesses rely on every day. Construction and manufacturing raw materials have seen some of the largest impacts. Here’s where raw material prices stand at mid-year: 

• Aluminum mill shapes: up 48.8% year over year 

• Copper wire and cable: up 24.2% year over year 

• Iron and steel: up nearly 7.0% year over year 

These can impact a wide range of equipment and goods, such as HVAC equipment, electrical components, fasteners, fittings, and structural materials.

3. Supply chain and freight constraints 

Even where materials are available, getting them where they need to go has become more expensive: 

• Diesel fuel prices rose 19.9% in a single month and 105.9% year over year, per Producer Price Index data. 

• Truck freight transportation prices climbed 17.3% year over year. 

For any business who moves product by road, these freight costs compound every other price increase along the way.

4. Interest rates

The Federal Reserve has maintained the benchmark federal funds rate in an effort to help control inflation. As the inflation rate has remained above the Fed’s 2% target, the board has kept the interest rate target at 3.5-3.75 percent to help temper spending. This can also have the effect of discouraging businesses from expanding and hiring more workers. 

Listen to Economic Insights by Nationwide: 2026 Midyear Economic Roundtable

Which industries are hit hardest

Not every client feels these pressures equally. The businesses most exposed to higher costs are those that depend heavily on metals, fuel, and freight. In addition, rising demand, government decisions and labor challenges have significantly impacted some sectors more than others. Below are some of the areas most impacted by recent changes to the economy and government decisions: 

• Construction: With input prices up over 6% and metals like steel, copper, and aluminum climbing fast, contractors face shrinking margins and growing gaps between project bids and final costs. In addition, labor pressure has had a large impact on businesses. There’s not much capacity if all of a sudden there is an increase in building activity. 

• Manufacturing: Any operation that turns raw metal into finished products absorbs tariff-driven price increases directly, often without the ability to pass all of it to customers. 

• Transportation and logistics: Soaring diesel and freight costs cut directly into the bottom line for trucking and distribution businesses. 

• Human services and senior living: Senior living and human services have been impacted by government changes. Human services organizations have been significantly impacted by federal funding cuts. Medicaid was also impacted by federal changes. Senior living is under pressure by the “peak 65” condition of Baby Boomers reaching the age of 65 and retiring/moving into senior communities and federal action on immigration has had an impact by restricting labor forces for senior living communities. 

Demand, labor challenges and rising costs for each of these sectors translate into real changes in insurable value, business interruption exposure, and overall financial risk. 

Watch the webinar: Mid-year commercial lines outlook

Turning economic pressure into a client conversation

Nationwide Senior Economist Ben Ayers and Government Relations Vice President Ben Brewster note that U.S. businesses have been extremely resilient when facing volatility, and they caution that flexibility and long-term planning need to be top of mind for leaders as they navigate the current environment. For the insurance industry, this also means coverage needs, replacement costs, and risk exposures are shifting for many businesses. 

For more information and resources to support your conversations with clients about rising costs and protecting their bottom line, you can visit the following: 

• Webinar with Nationwide Senior Economist Ben Ayers and Government Relations Vice President Ben Brewster 

• Economic podcasts with Senior Economist Ben Ayers 

• Nationwide business owner survey 

• Client conversation guide on increased costs 

• Business continuity management program 

The forces driving up costs at mid-year—energy shocks, tariffs, and supply chain disruptions—aren’t going away overnight. Having conversations with clients about how rising material and operating costs may have changed their risk profile, and reviewing their coverage with current values in mind can help them take steps to protect what they’ve built.  

How to help your clients limit the impact

Macroeconomic forces are largely outside any single business owner’s control, but their response to those forces is not. Here’s how you can guide them: 

• Review replacement cost valuations: Rising material prices mean many commercial properties and pieces of equipment are now underinsured. Proactively revisiting coverage limits protects clients from a painful gap at claim time. 

• Reassess business interruption coverage: With longer supply chain lead times, a covered loss may keep a business closed longer than expected. Make sure indemnity periods reflect today’s realities. 

• Open the conversation early: Don’t wait for renewal. A mid-year check-in positioned around these cost trends shows clients you’re watching the market on their behalf. 

• Document and educate: Share these trends with your book of business. A short note explaining why coverage reviews matter right now reinforces your role as a proactive partner.