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Heavy Duty Truck & Trailer Executive Summary

The economy in North America continued to grow in October all be it slowly.
Most sectors of the economy continued to show strength except for housing.
Employment showed signs of improvement. However the governmental sector
(states, cities and counties) continued to reduce staff to meet budget shortfalls.
Both manufacturing and non-manufacturing sectors added employees. The
weekly number of people filing for unemployment dropped to 425,000 down from
450,000-475,000. In a normal economy this number would be approximately

Signs of strengthening were indicated by the Purchasing Managers
manufacturing and non-manufacturing indexes. The manufacturing index in
October was 56.9. up from 54.4 in September. The non-manufacturing index
was at 54.3 up 1.1 points from September. Any number above 50 indicates that
the economy has been growing. The overall economy has been growing for 18
consecutive months and manufacturing has been growing for 15 months.
Combined both sectors added 140,000 jobs, of which 110,000 were nonmanufacturing.
This is key because 80% of all workers are employed in the nonmanufacturing
sector. The factors driving this growth were production, the
average work week, new orders and employment.

The Conference Board's composite of economic indicators also improved but
very slowly. Their growth rate was 5.1% through June but has since slowed to .
0.8% indicating consistently slowing overall growth. The leading indicators were
up slightly at 0.2. The coincident indicators were flat and the lagging indicators
were up slightly. All indicators continued to be affected by high unemployment,
consumer confidence and a slow housing recovery. Unemployment though
improving is still at 9.6% Consumer confidence though improved over August
was still only 50.2%. In a normal economy this would be at 90% or higher.

Housing and construction overall remain in a morass. New home sales remain
the most depressed with September sales annualizing at 307,000 units off 21.5%
from 2009. The median price improved to $223,000 up from $205,000 prior
month. A normal market would expect annualized sales of 1,000,000 units with
a median price of $250,000. There is currently an eight month supply of new
homes. Existing home sales are showing more improvement. September sales
annualized at 4,530,000 units with a median selling price of $171,000. Existing
home sales are near there historical average but prices are off nearly $30,000
from the $200,000 in a normal market. Over 35% of the homes sold in
September were distressed pricing or foreclosures. At current sales rates there
is a one year supply of existing homes. The outlook remains depressed for a
pick up in new construction. New housing permits dropped down 5.7% to an
annualized rate of 539,000 units. New starts improved to 610,000 up 4.1% over
2009. Completions were at 648,000 annualized, 10.1% below 2009, denoting
industry efforts to bring starts and completions in line with sales. Construction
overall remains depressed at $807 billion annualized in September. This is off
10.4% from 2009. A normal economy would expect construction to annualize
over $1 trillion.

Several things remain positive in the economy. Auto sales remain one of the
positive signs for the economy, they are currently annualizing at 12.2 million
units. Sales are especially strong for domestic manufacturers. Auto sales are up
over 15% above 2009. In addition, credit though light remains affordable.
Mortgage rates have approached 4% for a fixed rate mortgage and LIBOR
remains at 25 basis points. Overall the economy has avoided a double dip
recession but will continue growth at an agonizingly slow pace.

Trucking remains a bright spot with fleets reporting improved revenues and
profits. Fleets report that they have been able to improve pricing for 10
consecutive months. Shippers report that capacity remains tight. This is
exemplified by the Transcore spot freight index. In September this index was up
65% over the prior year. There are some concerns. October freight numbers
were off 2.5% from September which is generally a lower volume month. The
Cass Index of billing showed shipments down in October 5.2% lower than
September, and off two of the last three months. The UCLA/Ceridian index
measuring several factors relating to trucking and consumers has been down for
three consecutive months. This continuing softening of freight has fleets
rethinking the number of new trucks they will buy. All other factors would
indicate that fleets should be buying new. Used trucks pricing improved 6% in
October to $42,100 up from 40,000 in September. There continues to be a real
shortage of good late model sleeper trucks. October Class 8 new truck orders
were reported at 18386 units annualizing at an order rate over 200,000 units.
Many observers expect that 2011 build could range from 225,00- 240,000 units.
Weak freight and fleet desires to keep capacity tight make these numbers highly
problematic. Our outlook is to remain cautious and to observe through
December, if recent actions by the Fed and the completion of the U.S. Election
cycle will spur hiring and economic growth. Our current estimate is for a 2011
class 8 build in North America of 200,000 to 210,000 class 8 trucks.

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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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