Newsletter Archive

Heavy Duty Truck & Trailer Executive Summary

January economic numbers continue to refute the general prognostications of the North American economic press and U.S. politicians. January results issued by the U.S. Federal Reserve and the Institute of Supply Management (ISM) indicate that the U.S. and Canadian economies continue to grow but at reduced rates. Through December the U.S. economy has grown for the 75th straight month. The Fed saw most of its leading indicators of economic activity remained positive but at a declining rate. The ISM saw its measure of North American manufacturing activity return to a growth status with a 2.3 point increased reading from December. Any reading above 50 indicates a growing manufacturing sector. In general the outlook in the US and Canada by the central banks and by economic forecasters such as the National Association of Manufacturers, Conference Board, Federal Reserve and the ISM, are for slow or sluggish growth in early quarters (about 1% GNP) and a pick up the later quarters. The bad news for trucking is that the major leaders in declining economic activity are the continuing downturn in residential construction and domestic automotive production.
 

The outlook for freight remains hazy. Although freight levels are not expected to decline significantly versus 2007, no real pick up is projected until late in the third or early in the fourth quarters. Recently released results from publicly traded for hire carriers was flat to slightly improved gross revenue, but significantly reduced profitability. The major impacts to profitability were due to increased but unreserved fuel costs, high operating expenses and excess capacity. Most for hire carriers are projecting significantly reduced new truck and trailer purchases.

The outlook for truck and trailer manufacturers project build levels similar to 2007. Truck Manufacturers are projecting new orders and build in the range of 215,000 to 240,000 class eight (8) vehicles. Other industry experts such as (Heavy Duty Manufacturers Association (HDMA), Morton Labbe and Stu Mackay expect orders and production to be in the 175,000 to 180,00 range similar to 2007. October through December orders from ACT annualized at 20,000 per month or 240,000 units. Much of this buying was due to leasing company purchases for year end tax advantages and private fleets pacing annual buys based on newly released capital budgets. January orders have not been published to determine if the ordering trend continues.
 

After discussion with fleets, investment bankers and suppliers it remains our opinion that we will see no significant increase in freight or truck production until late 2008.

If you would like to read the rest of this article contact steve.caudill@businessperspectives.net.

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