Executive Concerns on Economy Q2 2025: Insights from Leading Companies

What’s common:

• Tariffs, geopolitics, and Chinese overcapacity pressure prices and margins.
• Demand uncertainty in autos, durables, and construction; reduced visibility.
• Energy/feedstock volatility and higher operating costs.

Distinctions:

• Dow: Most explicit about capital allocation shifts (50% dividend cut; capex reduced from ~$3.5bn to ~$2.5bn; cost savings ~$400m; European closures).
• Eastman: Highlights long supply chains, retaliation risk, and targeted 2026 cost reductions ($75–$100m).
• Celanese: Ultra-short order visibility, agile product flows (shipping U.S. material to Asia), protecting FCF ($700–$800m) via inventory and pricing actions.

• Tariffs can weigh on confidence and consumption, particularly in Asia; Europe faces industrial contraction.
• Input-cost dynamics (aluminum, PPI) are manageable but add planning risk; demand in U.S. cans remains resilient with recent unit growth.
• Preparing for expected 2026 strength (inventory positioning), while embedding tariff uncertainty into H2 guidance.

• Recovery signals appear first in Asia; backlog above parity across regions.
• Tariff effects modest (~1% of global components sales in Q2); management avoids building policy-led acceleration into guidance.
• Destocking persists in the mass market; lead times near pre-pandemic; inventory turns at a two-year high; ready to invest in working capital as recovery takes hold.

• Macro uncertainty elongates client decision cycles and slows hiring; however, easing recession fears and policy clarity have modestly improved sentiment.
• Labor remains tight (U.S. unemployment 4.1%; college-educated 2.5%; even lower for specialized roles), creating capacity constraints and demand for consulting as confidence returns.
• AI considered strategic, but near-term revenue impact limited; productivity gains help offset constraints.

• Dow: ~$400m in-year cost savings; dividend cut by 50%; capex reduced to ~$2.5bn; divestitures and asset optimization.
• Eastman: Targeting $75–$100m cost cuts in 2026; capex discipline and cash focus.
• Celanese: Protect $700–$800m FCF via inventory reduction, pricing, portfolio actions.

• Chemicals and packaging managing pass-throughs and margin capture amid cost volatility (e.g., polyethylene, aluminum, energy/feedstocks).

• Arrow: Inventory turns at a two-year high; prepared to deploy working capital as recovery emerges.
• Crown: Inventory planning ahead of anticipated 2026 strength.
• Celanese: Working capital optimization and inventory reductions to sustain cash generation.

• Dow: European capacity closures; asset sales and partnerships (e.g., Diamond Infrastructure Solutions cash inflow).
• Eastman: Asset optimization under review; innovation pipeline maintained.
• Celanese: Rebalancing regional flows (U.S.-to-Asia) as demand shifts.

• Policy/tariff headlines and trade investigations (dumping/overcapacity actions).
• Regional indicators: EU PMI/industrial production; China manufacturing and auto production; U.S. auto sales and construction starts.
• Input costs: aluminum, energy, coal, polyethylene pricing; PPI trajectory.
• Demand signals: book-to-bill ratios and backlog parity (Arrow); inventory turns; prebuy behavior around policy changes.
• Labor market data: unemployment for college-educated and specialized roles; hiring urgency and time-to-fill trends (Robert Half).
• Corporate actions: dividend/capex changes, announced closures/divestitures, and inventory positioning for 2026.

• Build planning flexibility: scenario-based guidance and shorter S&OP cycles to match compressed visibility windows.
• Protect margins with dynamic pricing and selective customer/product prioritization; tighten cost baselines ahead of potential 2026 demand.
• Optimize working capital to support a turn in demand—be ready to lean in as backlog/lead indicators improve.
• Align footprints and sourcing to tariff realities; diversify supply and sales channels to mitigate retaliation and overcapacity risks.
• Maintain liquidity and investment-grade flexibility to act on portfolio opportunities during dislocation.

“unfair trade practices... aggressive dumping... overcapacity out of China...” and a “9–12 month supply chain,” with tariffs likely “to show up in inflation.”

Tariffs may “have [an impact] on the consumer and industrial activity,” with Europe’s industrial contraction weighing on sentiment.

Expects a “challenging macro environment through the back half,” with tariff/geopolitical uncertainties and weaker end markets prompting cost reductions and capital allocation shifts.

Demand visibility “more like 2 weeks” versus historic 4–6 weeks; order timing affected by tariffs; coal pricing up ~5% in a month.

“Uncertainty around future trade policy” persists; tariff effects ~1% of component sales in Q2; lead times near pre-pandemic; backlog above parity.

Elevated uncertainty elongates decision cycles, but easing recession fears and policy clarity have modestly improved client conversations; labor remains tight for specialized roles.