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Heavy Duty Truck & Trailer Executive Summary


The outlook for the economy continued to show improvement in September. Indexes for both the
manufacturing and non-manufacturing economies showed growth for the first time in 16 months. The best
news is that the non-manufacturing economy showed expansion because over 80% of all employment is in
this sector. The Institute of Supply Management’s Purchasing Managers Index (PMI) for manufacturing
remained strong at 52.6. Anything reaching above 50 indicates an expanding manufacturing sector. Both
new orders and production are growing. The non-manufacturing index came in at 50.9 up from 48.4 in
August. The growth of the index was driven by production, new orders, order backlog and imports.

Leading economic indicators also remained positive increasing for the fifth straight month up 4.4% from the
low of the year. This is the third month that leading indicators exceeded an index of 100. The coincident
indicators remained flat but trending positive and the lagging indicators continued to decline. Overall these
indicators project a strong GNP for the third quarter in the range of 3.4%; up from a decline of -.7% in the
second and -6.6% in the first quarter.

The economy is far from robust and still indicates a long climb back to prosperity. Jobs continue to be a
major issue. New jobless claims continue to average about 525,000. A normal economy would expect a
weekly number of 275,000-300,000. Overall national unemployment is at 9.8% and rising. The consumer
confidence index is currently ranging from 53% to 54%. In a normal economy this number would be 90%.
LIBOR remains in a range promoting lending at .25-.30. Anything below .75 indicates money is moving
freely between banks. Consumer credit and lending remains tight and loans for individuals and
businesses remain difficult to obtain. New and existing home sales remain strong at an annualized rate of
5.4 million, but the average sales price of $187,000 shows values are still low. The average price in a
healthy market is $250,000. Finally annualized auto sales declined after “Cash for Clunkers” ended to
11.4 million from 14 million in August. A normal market is 14 million units. Retail sales improved 1% plus
in September over the prior year. This is the first improvement in twelve months. The growth was driven
by clothing and school supplies. However, it is premature to believe the consumer is back. We will need a
stronger fourth quarter of consumer spending to support a real turnaround.

The outlook for trucking is beginning to show the first miniscule signs of improvement. Freight has
improved the last two months and the level of year over year decline has improved from 13% to 11%. The
general pick up in the expansion of the manufacturing and non-manufacturing economies should support
this continued improvement. Additionally there are early signs that the used truck market which had been
moribund is beginning to improve. Values have fallen by one third but improved sales are occurring across
the U.S. and Canada. Tight credit remains a real dampener but more units are being sold. New Truck net
orders annualized at over 110,000 units. This is the first real improvement in several months. With the
continued aging of fleets, trucking companies need new trucks. Before significant buying can occur, credit
needs to improve, used truck values need to improve and freight needs a greater rate of improvement into
the 3%-4% per month range.

The current outlook remains that no significant uptick in truck industry activity will occur until the second
half of 2010. The reasons being are that employment will continue to decline through the first quarter of
2010 possibly reaching 10.3%-10.4%; and housing and auto sales need to improve as they are
responsible for nearly 30% of all freight. Overall the economy is improving but remains fragile and is
improving slowly. We believe that there is room for cautious optimism but are advising to remain prudent.

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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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