Robust freight conditions likely to keep demand well ahead of supply

Kenny Vieth with ACT Research

ACT Research reported Monday that supply-chain constraints kept a lid on the industry’s ability to raise build rates through 2021, at least until December when a torrent of red-tagged/incomplete units were finished. The insight was released in the company's Commercial Vehicle Dealer Digest monthly report. 

Within the report, ACT Research also provided updates on the broader economy and the impact shifts in the economy due to the pandemic are altering trucking freight and the truck production space.

“As supply constraints continue to dominate the conversation, broad-based economic and freight market strength is often overlooked. In addition to long lead-time manufacturing demand, U.S. consumers’ economic footprint has never been bigger,” says Kenny Vieth, ACT Research president and senior analyst. “GDP surged 5.7 percent in 2021, with the forecast for growth at 3.7 percent in 2022, and thanks to the long period of low interest rates, consumer debt service levels are at historically low levels, while household net worth has surged since the beginning of 2020.”

Vieth went on to say, “For transportation providers, the virus continues to bend consumer spending to goods and away from services. Significant congestion in ports on both coasts is expected to linger into mid-year, and pent-up demand in the manufacturing sector is growing, related to the same supply-chain woes that are impacting commercial vehicle production. Additionally, corporate profits continue their record-setting run, allowing businesses to invest in productivity enhancing equipment. With wages growing rapidly, machinery demand is well-above trend, as employers drive capital for labor substitution.”

Even discounting for unprecedentedly low automotive inventories, Vieth notes consumer-facing retail inventory-to-sales ratios remain unprecedentedly low, which will support freight demand deep into 2022. Additionally, used vehicle prices are at record levels across Class 8 age and mileage nodes, and data indicate record valuations for medium-duty and trailer assets.

“Healthy consumer and corporate balance sheets and pent-up inventory demand translate into continued robust freight markets and still-rising freight rates (to date),” Vieth says.

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