Analysts from MEMA and MacKay & Company confirmed the softening business conditions found throughout the aftermarket and dealer channels during a MEMA Pulse webinar Monday before turning their attention toward a potential recession and forecasts for 2025.
In looking at current market conditions, MacKay & Company’s Dave Kalvelage offered data similar to what was reported in the most recent TPS MarketPulse report.
Dealers and aftermarket sales have been trending down for a while, with pessimism around 2025 continuing to grow.
On a segment basis, Kalvelage says responders to MacKay & Company’s most recent survey indicates parts sales have held up better for aftermarket operations than dealers, with the former reporting sales down 1.1% year over year and the latter down 2.2%. Expectedly, fleets are also down 2.1% in their operations, Kalvelage says.
Looking deeper into the market, Kalvelage says there are some positive underlying statistics. The parts shortages that disrupted the industry throughout 2022 have mostly ended, and pricing is almost back in line with historical norms. MacKay & Company’s Truckable Economic Activity (TEA) — its key metric for measuring the industry’s health — also remains depressed but did see improvements in four of its five areas of measurement from Q1 to Q2, adds Bob Dieli, MacKay & Company economist.
[RELATED: Register now for our upcoming webinar on bolstering your bottom line!]
But how 2024 concludes and where the market goes in 2025 remains to be seen.
Dieli says his Enhanced Aggregate Spread (EAS) measurement, which has accurately identified the conditions that precede a recession since 1970, shows a recession could begin at any time. He says action by the Federal Reserve to shift the Federal Funds Rate and bring about a “soft landing” are possible but hardly assured.
When asked directly during Monday’s call, Dieli says he thinks there’s a 70% chance a recession occurs at some point in the near future. He also adds that a soft landing, if achievable, would still only extend the current market cycle position. It wouldn’t necessarily spur a period of growth.
“The soft landing option is doable but it will take a combination of events to take place,” he says.
[RELATED: Canadian trains back on track — for now]
As such, expectations moving forward are muted for most of the industry. Kalvelage says MacKay & Company’s aftermarket demand forecast still expects the industry to grow in 2024, but the company has revised that growth projection down slightly from 4.3% to 4.0%. Longer term, the company’s CAGR for 2025 to 2029 is 4.2%, about half of which will come from price.
And in the manufacturer space, MEMA’s Philip Atkins says 52% of MEMA Pulse survey responders say their businesses were at or above projections through June but only 35% expect to remain at that level in the second half. He adds 20% of suppliers expect to be down “significantly,” with a variety of reasons being given for the negativity.
He says vendors are pessimistic about equipment build forecasts too. According to MEMA’s most recent survey, 68% of suppliers think 2024 OEM forecasts (and 37% of industry forecasts) are too high. Sentiment is mostly similar for 2025, with suppliers saying 53% of OEM and 37% of industry forecasts are too high for that year as well.
As for what is expected? MEMA’s weighted forecast average for Class 8 truck builds are 293,000 for this year and 292,000 for 2025. Classes 5-7 are forecasted at 264,000 for 2024 and 269,000 in 2025 and, for trailers, 265,000 this year and 269,000 next year.
