Margins muscle through US supply chains

US business profit margins will remain elevated through 2025, with a boost from higher investments of recent years, despite challenges from slowing growth, less pricing power, and increasing debt cost.

What you will learn:

• Stability on the surface of the economy-wide margins masks movement along product supply chains. For example, many upstream producers and those in mid-stream transportation/ distribution have raised and kept margins well above their pre-Covid averages, such as in energy, metals, and food—often at the expense of customer margins in manufacturing and construction.
• However, several with elevated margins have likely seen a peak and their margins will now drift lower as their supply-chain counterparts reclaim a portion of their previous losses, leaving the larger overall composites largely unchanged.
• Aggressive reinvestment has boosted profits growth but with growing risks from fixed cost and interest payments, which drives a wedge between operating margins versus those from “net operating profits after tax and depreciation” (NOPAT) used by investors to value securities.