TRG | The Bottom Line – 7/18

TRG just wrapped up our quarterly industry “survey season,” highlighting trends in 1) heaving materials, 2) residential & non-res building products, 3) building product distribution, 4) contractor & surety, and 5) equipment rental industries. From our heavy materials contacts, our “Blame it on the Rain” flashnote summed up the quarter: rain (especially in May) was a wet blanket on otherwise good core demand. As one industry contact quipped: “Every state in which we operate has had a top-10 wettest month this quarter.” For our residential & non-res building products and distribution takeaways, four key themes emerged: 1) anything rate-sensitive is showing moderate declines (housing and local market non-res projects); 2) in non-res, large projects are still very strong and cancellations are modest; 3) the lack of labor is more of a pain point in res than non-res, given non-res is more skills-trade-oriented (and this issue will likely worsen, not get better, in coming months); and 4) consolidation is ongoing (especially in distribution). Our “Q2’25 Contractor & Surety Survey” showed continued resiliency on nearly all counts – current activity, sizable backlogs, projects coming to market, and both cancellations and delays being at levels that are not worrisome. All participants continue to monitor how tariffs could increase material costs, but thus far it is not a significant impact. Finally, this week’s “Q2’25 Equipment Rental Survey” shows a continuation of sluggish local market demand, robust demand from large projects, and discipline on fleet size and rental rates. All of this presents a mixed view in the zone of flattish for 2025. Q2’25 KPIs mixed, but relatively stable: time utilization and volume mixed, but rates holding relatively firm. The rubber hits the road over the next few weeks as earnings season heats up. We expect companies to report that while Q2 started with tremendous uncertainty, sentiment as the quarter closed improved somewhat. We expect greater business activity in general in 2H’25 based on TRG conversations with key industry contacts.