Heavy Duty Truck & Trailer
The U.S. and Canadian economies remained an enigma through July.
The Federal Reserve by region reported that the economy
continues to soften. The Conference Board index of economic
indicators saw a decline in the leading and lagging indicators
with a slight increase in coincident indicators. All changes
were very slight ranging from .1% to .3%. The Purchasing
Managers Index (PMI) ranged at 50 or above for the second month
indicating a growing manufacturing economy. Most manufacturing
indicators showed slight growth in new orders and backlogs but
also inventories. The inventory growth is believed to be a build
up to protect against supply shortages from China’s shut down
for the Olympics. The PMI for the non-manufacturing economy also
improved to 49.5 indicating that this sector also may be
returning to expansion. This sector has been strongly impacted
by the issues in real estate and the problems of the financial
industry. The GDP increased 1.9% unadjusted in the second
quarter. This is up from .60% in the first quarter. It has been
a surprise because most economists had believed there would be
no growth. The economy grew again in June for the 81st straight
month. Most of the strength has been attributed to continuing
strong exports and strength in non-automotive sectors.
The trucking industry has remained mixed in the downturn. There
are early signs that the industry may be moving up from the
bottom of the downturn cycle. Ton miles of truck freight have
been up for two straight months although intermodal remains down
over 2%. Stocks for publicly traded carriers have approached 95%
of their 52 week high for profitable carriers. These stocks have
remained strong for the last quarter. Navistar continues to
increase build rates at Chatham, Ontario and Escobedo, Mexico
with full year production up 20% over the prior year.
Freightliner has added 600 workers to their North Carolina truck
assembly operations due to orders for their new Cascadia model.
Through May new truck net orders have averaged 18,000-19,000
units indicating a possible 2009 build of 225,000 class 8 units.
For the next year, 2009 remains unclear as the credit crisis,
used truck values and the overall economy are continued drags on
the industry. Recent declines in oil barrel prices below $120
USD should help carrier profitability. Most major fleets would
like to replace their 2005 and 2006 model year trucks. How many
they will buy will be based on credit availability, used truck
prices, and the economy continuing to drive freight volume.
Overall we are cautiously optimistic that the outlook for the
end of 2008 and into 2009 should show an improving trucking
industry. We believe the upturn will be gradual and that the
2010 engine change will not promote pre-buy of additional units.
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