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Heavy Duty Truck & Trailer Executive Summary

Although statistically the economy has not moved to recession, most economic measuring agencies describe the overall economy as sluggish, slow growing, or flat. Economic numbers for the first calendar quarter show GDP improved 1% over the previously reported .6%. The economy grew in May for the eightieth straight month. The Conference Board reported that all the economic indicators (leading, coincident and lagging) were slightly positive. Also in May, the Institute of Supply Management reported that their Purchasing Managerís Index for manufacturing activity increased above 50 for the first time in 4 months to 50.6. This indicates a growing manufacturing economy. On the negative side the non-manufacturing index fell 5 points to 48.2 indicating, a significant weakening in this sector. Oil and commodity prices continue to drain the energy from the economy. The general outlook for the second half of 2008 is for continued slow growth, as consumer confidence remains at the lowest level since the early 1990s. There are many opinions as to when the economy will turn. Some economists are projecting that the current morass will last until mid 2009. Any upturn of significance will be spurred by a drop in both oil and commodity prices. There is no consensus as to when this will occur. Some leading economists are projecting that oil will be $80-90 per barrel by the end of the year. Others are projecting that oil may reach $170-190 per barrel. With global oil demand falling, Asian economies weakening, and Europe struggling as much or more than the U.S, it appears more and more likely that oil prices as well as commodities will begin to decline.
Trucking overall continues to decline. Truck builders according to latest data are aggressively eating into already diminished backlogs drawing them down 5000 units in June. Dealers continue to report declining new truck sales mirroring 2007 volumes. Public trucking fleet stocks rallied in June but it appears to be a false rally as many majors such as UPS, FedEx and YRC expect to publish declining profits for the second quarter. Major fleets are continuing to report that they can not totally recover their costs in all segments except flat bed carriers. There is still excess capacity in most segments. Even with bankruptcies up over 143% over last year, there is still significant conjecture that three to four LTL carriers and several full truck load carriers could fail by year end. Year to date, Fleets owning over 42000 trucks have failed. This has definitely damaged the used truck market. General opinion is that we should not expect an improvement in business conditions for over the road trucking until 2009. This improvement will be driven by overall reduced truck fleet capacity.
Overall the economy in the U.S. and Canada is stronger that expected and definitely stronger than reported in the news media. It appears that unless something catastrophic happens, it will continue to show slow growth throughout the second half of the year. A rebound for trucking will occur once fuel prices decline and excess capacity is eliminated.

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