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Heavy Duty Truck & Trailer Executive Summary


The pace of economic contraction increased in October. The much watched Institute of Supply
Managementís Manufacturing Purchasing Managerís Index fell to 38.9, the lowest level since
September 1982. Any number below 42 indicates a contraction of GDP over time. The PMI Non
Manufacturing Index also turned negative dropping from 50.2 to 44.4. The major drivers were, the
continued difficulty in the credit markets as well as a continued drop in consumer confidence and
spending. Consumer spending is off 1.2% from one year ago. Unemployment increased to 6.5%, the
highest level since 1994. With the continued drop in consumer spending and rising unemployment, the
outlook for the next several months is for a deepening recession.
The trucking industry continues to bear the impact of these issues. Freight is off nearly 2% this year
and is thought to be heading even lower. Estimates are that with weak holiday demand freight could
be off over 3% for the full year. New truck orders at the OEM level fell from an average rate of over
16,000 monthly, to less than 10,000 orders in September. Carrier bankruptcies reached levels not
experienced since the downturn of 2000-2001. Year-to-date failures are up over 30% compared to
2007. Approximately 117,000 vehicles or nearly 6.5% of the trucks hauling freight have been
eliminated from carrier capacity. Even with this reduced supply, capacity still exceeds demand for
trucks to haul freight. Many experts are now predicting that there will be no significant pick up for
trucking until 2010.

Factors are beginning to emerge that show a recession may not be as protracted as thought. These
beliefs are based in the following factors:


  • The economic stimuli implemented globally are starting to become effective.


  • It appears that many countries led by the U.S. will continue to use monetary policy to inject cash
    into their economies. The U.S. is proposing a $600 billion stimulus package to be implemented in
    January or February 2009. $150 billion will be direct rebates to consumers.


  • LIBOR has dropped back into the range reflecting a healthy lending environment. It has dropped
    from a 200 basis points spread between the Federal Funds rate, to 68 to 70 basis points during
    the first week of November.


  • Existing and new home sales for September in the U.S. reached nearly 5.9 million units
    annualized. An annual rate over 5.5 million indicates the start of a healthy market.


  • Oil has ranged from $60-$70/ barrel, reducing stress on consumers, trucking and manufacturers.


Our observations are that the economy will continue to decline over the next six months and
unemployment could reach 8% in the U.S. Because of the stimulus actions which are being taken, it is
our belief that the economy could be out of recession by mid 2009. Our forecast is for a difficult time to
continue in the North American trucking industry and any upturn to begin in late 2009.




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This summary is offered for information only. It is compiled from several governmental and industry resources. The origin of the information is given where possible. Any actions taken as a result of this summary is the sole responsibility of the readers. Business Perspectives takes no liability for the use of the information above its informational use. The opinions expressed are the sole property of Business Perspectives LLC and should not be redistributed or duplicated.

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