Dec 13, 2024 | 4 min read
Top Line Summary
• Steady Demand, Few Surprises: Companies report stable trends with no major shifts, viewing consistency as a positive in uncertain times.
• Cautious Optimism Amid Uncertainty: Economic and political uncertainty is holding back spending, but some see signs of improvement ahead.
• Adapting to Tariffs and Global Pressures: Businesses are navigating tariffs confidently, reducing reliance on China and leveraging local supply chains.
What Companies Are Saying About the Economy and Tariffs
Steady Trends, Few Surprises
As with last quarter, demand trends ranged from modestly weak to very strong, with no major surprises. Accenture described the environment as “more of the same,” while 3M noted trends were “largely in line with expectations.” Similarly, IDEX said they hadn’t seen a “noticeable change,” and IBM reported “no change in client buying behavior.” Visa described consumer spending as “relatively stable,” and JP Morgan called it “a little bit boring” because it has become predictable. For some, this stability was a positive shift—Robert Half pointed out that their “stable and consistent weekly results” are better than when trends were “drifting down.”
Uncertainty Holding Back Demand
Companies across the board described cautious behavior due to uncertainty. Bank of America said their commercial clients “want to grow” but are being “more careful.” IBM noted a “pause in discretionary spending” caused by economic uncertainty, while Old Dominion Freight Line said uncertainty is “potentially holding the economy back.” Some companies are hopeful activity will pick up as clarity improves, but they’re not counting on it yet. Genuine Parts Co. mentioned customers are pausing—not canceling—capital projects until there’s better visibility. Dover Corp said if there’s “certainty going into ’25,” they expect project-related business to improve. Sherwin Williams noted signals are shifting “from red to yellow, and some from yellow to green,” but demand may stay “choppy” in the near term.
Preparing for Tariff Shifts
Companies feel better prepared for potential tariff hikes, thanks to their experience with previous rounds and pandemic-driven disruptions. Tapestry said they’ve adapted to so many challenges that they’re “well-versed in managing through this.” Ball Corp shared that they’re comfortable navigating tariff exceptions, and Fortive reminded us that the 2018 tariffs are still in place. Many companies have reduced their reliance on China and shifted to local supply chains. Carrier now imports a fraction of what they used to from China, and Aptiv noted that proposed tariffs on Mexico previously lost momentum because of their impact on vehicle costs and consumers.
Weakness in China and Europe
China continues to show weak demand, with companies describing the environment as constrained, pressured, or soft. Some bright spots exist, such as EV production and electricity demand, but most are still waiting for the effects of recent stimulus measures.
Europe’s growth remains sluggish as well. Companies pointed to both cyclical and structural issues. Dow Chemical mentioned “soft demand” and a lack of regulatory policies, while Colgate-Palmolive noted Europe’s persistent long-term challenges. Northern Europe lags behind the stronger southern regions, with Mastercard describing it as “a tale of two cities.”
Price Sensitivity Driving Consumer Trends
Consumer companies are lowering prices to boost demand, as they face strong resistance to price hikes but see demand surge when prices drop. McDonald’s is being “thoughtful about incremental pricing action” due to this resistance, while YUM! Brands shifted to lower price points in pressured markets to compete. Amazon and Target also reported strong responses to price reductions. Meanwhile, Mondelez said volume growth is rebounding as inflation cools, and most companies are sticking to historical pricing patterns tied to cost inflation.
The Bottom Line
Despite ongoing uncertainties around the economy, tariffs, and global demand, companies are largely holding steady. Many have adapted to changing conditions, especially in managing tariffs and supply chains, and are cautiously optimistic about the future. However, challenges in China and Europe and consumer sensitivity to pricing remain key areas to watch.
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