COLUMBUS, Ind. — Relaxed supply chain constraints are making November’s trucking industry economic forecast look slightly better than October, according to ACT Research’s latest release of the North American Commercial Vehicle OUTLOOK, 2022.
ACT Research stated that if inflation remains elevated, the Fed will continue its aggressive response, increasing the chance of a sharper decline in economic activity.
Looking to 2023, Class 8 forecasts are unchanged, while Classes 5-7 reflect more of a pull forward in demand, according to ACT
“Our 2023 forecasts belie current economic activity,” Kenny Vieth, ACT president and senior analyst, said. “Using Class 8 as an example, record orders in September followed by robust preliminary orders in October, large backlogs, a string of record-low cancellation months, and easing supply-chain constraints, all point to continued strength into 2023.”
Vieth said the maxim to adhere to is “don’t fight the Fed,” adding that the longer inflation remains elevated, the more aggressively the Fed will respond with higher interest rates.
“This, in turn, increases the chances of a sharper decline in economic activity, and results in fewer commercial vehicles required to facilitate this lower level of activity, and will likely exacerbate downward pressure on spot and contract rates, adversely impacting carrier profitability,” Vieth said.
Vieth said that ACT is not yet willing to chase volumes all the way up the ladder in 2023.
“The critical factor in forecasting 2023 is when do lower freight volumes and higher borrowing costs compress carrier profits sufficiently to kill the cycle?” Vieth said. “Our current thinking is the negatives begin to weigh on orders as soon as 1H’23 and more meaningfully by the second half of 2023; however, with prebuying ahead of the California Air Resources Board mandates that start in 2024 and considering carrier profitability strength, there is a compelling case to be made for production volumes to be sustained at 2022 levels through the end of 2023.”
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