Class 8 Truck Sales Dip Again, Recession On The Way?

“In the context of increasing general economic uncertainty, slowing freight growth, and softening new truck demand, lower used truck sales beg the question of whether demand is waning, supply is wanting, or the reality lies somewhere between.” Steve Tam, Vice President at ACT Research

Little Rock, Arkansas – According to ACT Research’s (ACT) latest release of the North American Commercial Vehicle OUTLOOK, warning signs are flashing for the US economy, and by extension for the North American commercial vehicle industry.

“Over the course of Q4’18, the list of indicators flashing yellow became longer and brighter for the US economy,” said Kenny Vieth, ACT’s President and Senior Analyst. He elaborated, “While there is insufficient evidence to make a recession call, there is enough presently to suggest growing potential for sectoral recessions, à la 2015.”

Regarding the transportation industry, he noted, “After several months of deterioration, the spread between contract and spot rates has been sufficiently wide for a sufficiently long period that ACT’s rate pressure analysis is now calling for negative contract rates, if just, by Q2’19.”

 

This warning from ACT comes amid additional warnings from trucking industry experts like FTR’s vice president of trucking, Avery Vise. Vise recently said of trucking’s business outlook for 2019, “At this point we expect trucking conditions still to be slightly positive by the end of the year, although the downside risks clearly seem greater than the upside.”

Class 8 Truck Sales Slip Again In December

Adding more fuel to the fire of fears was that preliminary used Class 8 volumes (same dealer sales) slipped for a second consecutive month in December (-7%), marking the first time since January 2016 that same dealer sales have fallen below 2,000 units.

Other data released in ACT’s preliminary report included year-to-date comparisons for December 2018, which showed that volume was up 8% compared to the end of 2017. Average price rose 13% ytd, while average miles were flat and average age, improved but was still 3% below year-to-date December 2017.

Regarding ACT’s medium duty forecasts, Vieth said, “Preliminary December orders were modestly below the current trend, with orders averaging 25,000 units per month in 2018, which continued to exert moderate upward pressure on forecasts.”

 

Still Reasons For Optimism In 2019

Even though there are some economic warning signs, FTR’s Vise says he expects the trucking environment will remain stable especially in the first half of 2019. “We would anticipate that trucking conditions will be relatively stable through the first quarter of 2019 and perhaps a bit beyond that, but the second half of the year should be noticeably weaker due to factors such as lower active truck utilization and increased cost of capital.”

The heavy commercial vehicle market may not reach record heights in 2019 as it did in 2018, but it should remain stable as well, according Steve Tam, Vice President at ACT Research. “Stories of a white hot market abound, with many dealers commenting that they do not have sufficient inventory to meet demand,” Tam recently said.

Still, Tam emphasized the importance for buyers and sellers to keep a proper perspective on the market this year. “However, in the context of increasing general economic uncertainty, slowing freight growth, and softening new truck demand, lower used truck sales beg the question of whether demand is waning, supply is wanting, or the reality lies somewhere between,” he said.

He continued, “If used truck pricing is any indication, and we believe that it is, demand is still easily outpacing supply.”

 

About ACT Research

ACT Research is recognized as the leading publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasting services for the North American and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies. More information can be found at www.actresearch.net.

Image courtesy of Paccar/Peterbilt

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