For more than a year, ACT Research has been forecasting the up-cycle in the Class 8 market to run out of steam around the third quarter of 2019. In the company’s newest North American Commercial Vehicle Outlook report, ACT Research reiterated that expectation.
“Over the past couple of quarters, we have been beating the drum loudly so that our customers could be as well positioned as possible for when the downturn in industry activity inevitably occurred,” says Kenny Vieth, ACT’s president and senior analyst. “Starting around six weeks ago, we began to see announcements of staffing reductions and plant shutdowns from OEMs, as well as from major tier-one suppliers. Anecdotes suggest the lower tiers on the supply chain have experienced production volumes cuts since early in September.”
Vieth says two metrics of note further show the downturn likelihood. They were the continued pulldown of the Class 8 backlogs, owing to ongoing order weakness, and a fourth consecutive month of record new truck inventories.
“From a net freight perspective (freight less productivity), growth falls from 4 percent in 2018 to 0.2 percent in 2019, as productivity has risen with a vengeance in response to the sharp run-up in freight rates in 2018,” he says.
Additionally, in the medium-duty space, he adds, “In the near term (2019), there remains a bit of upward pressure on production, though it started abating in July. Based on the accumulation of inventory, we expect further slowing in medium-duty build as the year progresses, a sentiment echoed by recent OEM layoff and production curtailment announcements.”
