According to ACT Research’s (ACT) latest State of the Industry: Classes 5-8 Report, Class 8 market-leading indicators continue to erode, in concert with deteriorating freight volumes and rates, even as mid and downstream data points remain robust.

“Ultimately, the current situation of weak orders and strong builds is unsustainable,” said Kenny Vieth, ACT Research’s President and Senior Analyst. He explained, “July orders conformed to traditional seasonal patterns, falling 80 percent year-over-year, while industry build posted its second strongest per-day rate since November of 2006. This order-to-build imbalance has caused backlogs to tumble since their October 2018 peak. Unfortunately, without a catalyst in sight, it is a trend that we expect to continue.”

Regarding the medium duty markets, Vieth commented, “Medium duty metrics remain in better balance, but there are signs of modest fraying, with orders below year-ago levels for a seventh consecutive month in July, the build rate accelerating, backlog falling, and inventories rising. While below the rate of build, retail sales continue strong.”

Key Risk to N.A. CV Market Forecasts Is Trade War with China

According to ACT Research’s (ACT) latest release of the North American Commercial Vehicle OUTLOOK, the key risk to all commercial vehicle market forecasts remains the on-again trade war with China.

“This month’s chart, the US$ to Chinese¥ (RMB), illustrates why trade wars are neither good, nor easy to win,” Vieth said. The chart can be viewed here.

He elaborated, “As can be seen, after the U.S. fired the latest salvo in the trade war on Aug. 1, the Chinese responded with in-kind tariffs and a 3 percent currency devaluation – so far. Since the first 'shots' of the trade war were fired on March 1, 2018, the RMB has fallen 12 percent versus the US$.”

Vieth added, “So, tariffs imposed by the US have been met with in-kind tariffs from China, and the Chinese government has allowed the yuan to devalue, thereby offsetting the US tariff impact, while simultaneously making US goods even more expensive in China.”

He concluded, “The bigger risk, especially to emerging economies, is that in order to compete with China, they will have to devalue their currencies, making US goods more expensive in more countries and raising the risk of a deeper global downturn.”