Class 8 build rates may suggest upside to the 2019 forecast, but large new inventories and deteriorating freight and rate conditions suggest erring on the side of caution remains the right call, according to ACT Research’s recent release of the North American Commercial Vehicle Outlook.
“Current Class 8 market activity is rapidly approaching the precipice and everyone should be preparing for a rapid downward correction in production levels in the next handful of months,” says Kenny Vieth, ACT president and senior analyst. “Current data and anecdotes make a strong case that the call for a Q3’19 inflection point expectation remains intact.”
“At the heart of our cycle duration prediction, carrier profitability and production peaks always lag the freight cycle, so capacity building always accelerates relative to freight growth at exactly the wrong time,” Vieth says. “Excluding the prebuy and housing bubble that impacted 2004-2006 cycle, peak-of-cycle build rates have historically lasted around five quarters. For this Class 8 cycle, we date peak build rates to June 2018, so we are just now entering quarter five.”
Regarding ACT’s medium-duty forecasts, Vieth says, “Retail sales are tracking the medium-duty forecast very well, but the current situation, as it relates to build, suggests upward pressure on the forecast. Large new vehicle inventories and slowing in order intake balance this pressure, resulting in stasis for the medium-duty forecast.”