In the release of its Commercial Vehicle Dealer Digest, ACT Research noted expectations for the Class 8 and trailer markets anticipate an accelerating pullback in build rates, as freight market conditions remain at a low ebb. While less cliff-like, MD market indicators continue to support a modest correction into 2020.
“With about 80 percent of the North American Class 8 market and 90 percent of the North American Classes 5-7 and trailer markets beholden to the U.S. economy, it is little wonder that we expend great energy to continually assess the economy,” said Steve Tam, ACT’s Vice President. “This month, it is worth touching on the weaker-than-anticipated activity in the economies of Canada and Mexico, with GDP expectations for the former pared back to 1.5 percent in April, and the latter falling to 0.6 percent this year.”
Tam added, “Not surprisingly, the primary drivers of devolution in North American economic activity and expectations are broadly the same in all three cases and can be succinctly summed up in just a few words: trade war, threats and tariffs. More broadly, the slowdown in global economic activity in large part represents the fallout from the clash of economic titans that began in early 2018.”
He concluded, “The key risk to all vehicle market forecasts, and the U.S. economy broadly, in either direction, remains the trade war with China. With U.S. manufacturers and farmers struggling to compete on the tilted global playing field, the key driver of growth in the mid-term outlook is the U.S. consumer, with job and wage growth, as well as savings rates, all at healthy levels and supported by consumer confidence and spending.”
The report, which combines ACT’s proprietary data analysis from a wide variety of industry sources, paints a comprehensive picture of trends impacting transportation and commercial vehicle markets. This monthly report includes a relevant but high-level forecast summary, complete with transportation insights for use by commercial vehicle dealer executives, reviewing top-level considerations such as for-hire indices, freight, heavy and medium duty segments, the total US trailer market, used truck sales information, and a review of the US macro economy.
ACT Research: Class 8 Regression to the Mean Coming in 2020
According to ACT Research’s recently released Transportation Digest, the Class 8 market is moving from peak activity in sales and build in 2019 to a substantial correction in 2020. Activity for the total MD market was mixed in September, with weakness in sequential comparisons, but expansion still evident in longer-term performance.
The report, which combines ACT’s proprietary data analysis from a wide variety of industry sources, paints a comprehensive picture of trends impacting transportation and commercial vehicle markets. This monthly report is designed as a quick look into transportation insights for use by fleet and trucking executives, reviewing top-level considerations such as for-hire indices, freight, heavy and medium duty segments, the US trailer market, used truck sales information, and an overview of the US macro economy.
“With the trade war as a major caveat to forecast expectations, our underlying view is that the economy will experience slower growth but not recession in 2020, setting the heavy-duty truck market up for a modest rebound in 2021 followed by growth into 2023. However, the far years of this forecast are influenced by the prospect of new emission controls in 2024, triggering a 2023 prebuy, followed by a 2024 payback,” said Kenny Vieth, ACT’s President and Senior Analyst. “This regression-to-the-mean for 2020, after near-record production in 2019, has been our forecast since early 2018, so our subscribers have had nearly two years of yellow-light signals on the upcoming correction.”
Regarding the medium duty market, Vieth commented, “Customers clearly remain concerned about the near-term future, as demonstrated by the continuing pullback in order activity that has led to narrower backlogs. Despite the weaker looking front-end of the demand cycle and very high inventories, build and sales continue to perform at near-record levels.”
Used Truck Sales Jumped 43% M/M, but YTD Down 17%
In what is largely believed to be an anomaly, used Class 8 same dealer sales volumes jumped 43 percent month over month in October, following a 5 percent M/M loss in September, according to the latest release of the State of the Industry: U.S. Classes 3-8 Used Trucks, published by ACT Research.
Longer term, sales were up 7 percent year over year, but down 17 percent year to date compared to the first 10 months of 2018. The report also indicated used Class 8 average miles increased month-over-month, rose 4 percent, and were virtually flat year-to-date, while average age inched up 1 percent compared to September but rose 4 percent on a year-to-date basis. Average price also shed 13 percent M/M, while growing 3 percent YTD.
“Despite the pop in sales reported above, most dealers are reporting lagging used truck sales; at the same time, inventories are continuing to build,” said Tam. “The two forces are conspiring to drive prices down and creating a buyer’s market.”
Tam concluded, “Prices have reached a point that is attractive enough to some buyers who are looking to upgrade their fleets to make a purchase decision, while fleets who have been holding onto trucks that they no longer need are making these trades available for purchase, as freight softens.”