Heavy Duty Truck & Trailer
numbers continued to signal an economic recovery sometime
later this year. The closely watched ISM Purchasing
Manager’s Index rose to 48.9, a 4.1 point improvement from
June. An index of 50 or greater indicates a growing
manufacturing economy and an index consistently above 42
indicates a growing GNP. Overall the index indicates a
return to growth fairly soon. Of great concern is the Non
Manufacturing Index which fell to 46.4 from 47. This
indicates a greater contraction month over month. A major
concern is that nearly 80% of all jobs are in this sector.
There is growing concern in many places that this may be a
jobless recovery. Even the Presidential administration
believes unemployment will reach 10% before it begins to
decline sometime in 2010. The Conference Board’s Leading
Economic Indicators rose for the 3rd straight month. They
have increased 2% versus December 2008. Coincident
indicators are balanced and lagging indicators continue to
decline indicating overall a turnaround but lengthened in
duration of recovery.
Key factors that will drive improvement also continue to get
better. All housing sales annualized, improved to 5.27
million units. This is up over 100,000 units from June and
housing sales have improved for seven consecutive months.
Average housing prices remain depressed at approximately
$185,000. Homes prices need to average $250 thousand
to begin to show equity build and eliminate higher bank loss
reserves. New housing starts and permits remain in balance
at 568,000 permits and 582,000 starts. New single family
completions were at 818,000 with most of the overbuild in
condominiums. The month’s supply of new homes fell to 9.4
from 9.8 for existing homes and 8.8 for new homes from 10.2.
A normal market would see 1 million new home
starts, builds, and completions. Automobile sales improved
significantly in July to 11million units annualized. This is
up from 9.6 million in June. This significant uptick has
been partially due to the “Cash for Clunkers “ program that
implemented in July. A normal market is 14 million units.
Finally LIBOR spread for one month remains a .28/.29.
Anything under .75 indicates a robust banking environment.
Overall the economy is improving but it still indicates that
it will be a long steep climb out. It may be late 2010
before we see any real job recovery.
Trucking continues to suffer the brunt of the economic
downturn. Freight is off almost 14% from 12 months ago.
Fleets, although aggressively right sizing, still have
excess capacity and no where to turn to alleviate it. The
global used truck market is nonexistent forcing fleets to
park their excess trucks. This factor has not only hurt new
truck sales at the OEM but also aftermarket parts and
service sales. Heavy duty OEM’s now forecast an annualized
sales of new class 8 trucks of 93,000 units. This is the
lowest level since 1981. The outlook for 2010 is not much
better with industry experts expecting sales of 110,000 to
140,000 units. We concur with these estimates as there is
little outlook that would project a rapid increase in
freight or construction that drive the
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