COLUMBUS, Ind. — While the shockwaves of the COVID-19 recession continue to depress both the North American and global economies, ACT Research’s recently released Transportation and Commercial Vehicle Dealer digests show signs of recovery.
The reports, which combine proprietary ACT data and analysis from a variety of sources, paint a comprehensive picture of trends impacting transportation and commercial vehicle markets. The monthly report serves as a quick look at transportation insights for use by fleet and trucking executives, reviewing top-level considerations such as for-hire indices, freight, heavy- and medium-duty segments, the U.S. trailer market, used truck sales information and an overview of the U.S.’s macro economy.
According to ACT’s Transportation Digest, June marked the fourth month of what will go down in the record books as the most severe business cycle downturn since the Great Depression. The report noted that the extent of the shock was a near total surprise to businesses and forecasters in the months of March and April.
“In February, when the impact of the coronavirus was still viewed skeptically, ACT Research anticipated a 33% drop in Class 8 North American retail sales in 2020, but of course that worsened as the full impact of the virus began to reveal itself,” said Kenny Vieth, ACT’s president and senior analyst. “The impact of COVID-19 was to take a flattish economy and push it over the cliff.”
At the onset of the COVID-19 crisis, freight surged as stay-at-home orders created a rush on food items, common household supplies and technological products needed to work from home. The delivery of much-needed medical supplies also spurred a growth in freight during March.
“As the recession tightened its grip, April marked the low point for freight, with daily indicators on loads, tender volumes and freight rates hitting bottom,” he continued. “That said, even as high-level macro indicators, like employment and industrial production, showed decline, freight started to recover in late April and into May, reflecting the nascent revival of supply chain activity. These same daily indicators showed improvement and growing momentum all through May.”
Vieth said he remains cautiously optimistic that there is an end in sight economically.
“We continue to anticipate a transition into a slow recovery, that will gain speed as we proceed through the second half of this year and into 2021, with the caveat that there are still many unanswered questions about the trajectory of the virus and the impending recovery,” he added.
Commercial Vehicle Dealer Digest
ACT Research’s Commercial Vehicle Dealer Digest showed a marked improvement compared to a month ago. This change could be attributed to the reopening that is under way in most states.
“The reopenings that have been occurring since late April represent the first steps in the march toward economy recovery and green shoots are sprouting thanks to massive stimulus from Congress and the Federal Reserve,” said Vieth said. “Despite that investment, which is helping to put the economy back on track, the pandemic remains a ticking clock for many Americans whose unemployment benefits will start expiring in September.”
Vieth said he expects the economy to expand rapidly in 2021, continuing the forward momentum the commercial vehicle industry is now seeing.
“Demand recovery beyond replacement levels is a process that takes quarters to achieve. We see the economy expanding rapidly in 2021, creating an imbalance between effective capacity, the ability to get drivers back into seats in real-time, and freight demand,” Vieth said.
“When that imbalance comes, it will be the match that lights the long fuse on a meaningful volume recovery,” he continued. “At that point, on top of market-driven demand, short-trade cycle fleets will have considerable pent-up replacement demand. That replacement activity will be supported by strong demand for desirably-spec’d late-model vehicles.”
Vieth also noted that the current economic crisis is unlike those previously faced by the global community.
“While it is hard to see silver linings presently, we note that this economic downturn was not triggered by the usual supply and demand considerations, bubbles, financial issues, etc., but by a disease,” he said.
“Coupling an otherwise structurally-sound pre-COVID economy, with strong Federal Reserve and Congressional support, and rising pent-up demand, there is a case to be made that the economy will respond strongly into 2021,” Vieth said, concluding, “We believe that the maturing millennials will be the key to pushing the economy forward as they resume their transition to marriage, kids, and mortgages.”