Pulled forward and foggy

Rough weather warped a lot of economic data in January. Pull-forward spending to avoid tariffs looks to have skewed February activity. And we haven’t yet heard enough about March to know how we should plan for what’s ahead. We’re in the middle of an economic fog bank. As we await reliable hard data, we’re working with anecdotes—most of them about deferred spending decisions in the face of high uncertainty.

Still, there are also encouraging notes suggesting the wheels aren’t coming off the U.S. economy’s bus. Among those were comments March 18 by ITT CFO Emmanuel Caprais at a Bank of America conference—demand for the company’s pumps, valves and connectors remains “pretty strong and […] at elevated levels”—as well as by BofA CEO Brian Moynihan, who the next morning told CNBC viewers consumer spending is holding up fine.

It's foggy but it’s no time to freak out.

— Geert De Lombaerde

 
• ‘It’s never been more difficult’ to forecast the North American market, says CEO of truck maker International’s parent

• Trump’s tariff flip-flops put the energy industry on edge

• ITR Economics’ Connor Lokar on why tariffs will not tip the U.S. into recession
 

Virtuous or vicious?

When might we expect a little clarity? It’s unlikely to be April 2, when the Trump administration says it will notify numerous trading partners of new tariff rates. There are too many variables in that equation. But the first-quarter earnings season starts in earnest two weeks later and executive teams will have to provide far more clarity than most have to date. Will the numbers we see and commentary we hear restore confidence or reinforce caution?

 
• Chevron CFO: Company ‘more wait-and-see’ on IRA-related investments

• Food & beverage firms budget a slight capex drop for the first time since the ’08-’09 recession
 

"With the modular solution we have, we could move
that and scale that in a proper way in the United States. 
Those types of discussions are being brought up."

Lear President and CEO Ray Scott discussing assembly work in the auto parts supplier’s e-systems unit during a Wolfe Research event March 18. The company has been migrating a lot of labor-intensive work from Mexico to Central American countries but Scott said moving assembly work to the States would be about tariff avoidance.
 

Focused (again/as always) on efficiency

I spent a lot of time in this newsletter in 2022 and 2023—when recession fears were widespread—writing about the cost-cutting focus of executive teams in manufacturing, trucking, energy and beyond. Then, it was mostly about recouping margin lost to inflation. In 2025, the focus is far more about possible tariff costs and a top line that’s under threat should demand drop off in earnest. Either way, pruning and productivity are back atop the agenda.

• What can the U.S. learn from China's manufacturing growth?

• Ford’s chief futurist on balancing the provocative with the plausible
 

5.8%

February's daily sales growth at industrial distributor Fastenal

Here’s another clear sign many businesses pulled forward spending when tariff talk picked up. Historically, Fastenal’s sales increase from January to February is 1.3%.

What we'll be watching

For one, we’ll be testing the theory that time brings clarity. We’re betting there will be some jockeying—and maybe a mini-deal or two—ahead of the April 2 tariffapalooza. But we also expect many more declarations that won’t help lift the fog.

In addition, we’ll get the vibes from the oil patch via the latest Dallas Fed Energy Survey. And we’re only about 10 days from the next Manufacturing PMI reading. Back to the idea of confidence or caution: What will that index’s production and new orders components give us?