Priority No. 1: Managing margins

The vise appears to be tightening on companies of all sizes. This week’s high-level June inflation reading was calm but many economists pointed to underlying pressures on goods producers’ input costs. The first few days of earnings season have seen executives echo those concerns—and outline reactions that will pass on costs or, as high prices do, reduce demand.

– Geert De Lombaerde

 
• Fastenal leaders see more stable activity—and more price hikes ahead

• J.B. Hunt execs eye at least $100M of cuts in face of cost pressures

• Volvo Cars takes $1.2B hit from tariffs and product delays
 

Charting a course through the unknowns

It’s far more likely than not that today’s lay of the tariff land isn’t how things will eventually shake out. (They will eventually shake out, right?) In other words, you still have time to take a few breaths, survey the ground ahead and figure out how to best move forward.

 
• A framework for viewing tariff implications

• How a time-tested military strategy can help executives navigate the highest economic uncertainty in decades
 

"With some of the newest import taxes putting
upward pressure on construction input prices,
profit margin expectations may
face pressure in the months to come."

Anirban Basu of Associated Builders
and Contractors, commenting on
the group’s most recent member survey

• Contractor optimism grows as
backlog indicator rebounded in June
 

Looking for a dance partner

If your plan for your business involves being a buyer or seller, you probably have some time to catch the next M&A wave. Experts say the recent spate of transactions doesn’t mean the market is hot: Talks slowed big time in the spring and the deals just announced reflect connections made before tariffs snagged most of the headlines.

 
• Ford vice chair: Why auto OEMs haven’t consolidated

• Despite deal flurry, M&A watchers say activity is set to slow
 

41%

The share of respondents to the latest Baird/RER Equipment Rental Industry Quarterly Survey saying their companies missed internal Q2 budgets

High interest rates and policy uncertainty have eroded construction backlogs, particularly for smaller projects. A brighter note: 46% of respondents still plan to increase their equipment capex this year—although that may be because they also say new units are growing more expensive.

 
• Equipment rental survey shows revenue drop, worsening outlook
 

What we'll be watching

Firstly, we want more earnings-season data points and insights into the inflation pressures detailed above. The next 10 days or so will see many metals, automotive and energy companies step to the microphone. In addition, we’ll be keeping an ear tuned to if and how much those cost pressures are eating into demand. Related: The BEA will release its first Q2 GDP calculation on July 30.