A study of the recovering economy, demand destruction, increasing orders for Class 8 trucks and trailers and the importance of tracking new COVID-19 cases throughout the country were discussed during Wednesday’s Heavy Duty Manufacturers Association’s (HDMA) most recent webinar.
While GDP data indicates the U.S. economy is improving, it appears the GDP’s rebound will not reach pre-pandemic levels forecasted at the beginning of the year because of demand destruction caused by the coronavirus pandemic (see chart).
“We do see a recovery in the overall economy but this highlights demand destruction which is fundamental to what is happening with the equipment and freight markets,” says FTR Chairman and CEO Erik Starks. “This demand destruction suggests we never get back up to the levels of a traditionally base kind of a forecast.”
Regarding Class 8 trucks, Starks says orders clearly have picked up and are currently at replacement levels. However, the current order level is below the average between the start of the year and now. What’s undecided at this point is whether the uptick was because of pent up demand.
“Ultimately, we know there has been some improvement for some fleets in the market to go purchase equipment. This is going to be a welcome sign as we move out to the balance of this year,” Starks says. The question is will there be a jump in totals as the industry enters the order season in October, November and December, he adds.
“I would not be surprised if we had some ordering within that market but the fundamental [data points] still don’t support a huge amount of equipment being built and purchased through the balance of 2021. It’s not until 2022 when that picks up,” Starks says.
The trailer market looks very similar in order behavior as the Class 8 side. It has picked up over the last several months and looks relatively good, and early August data indicates a good month for trailer builds, Starks points out.
“I think there’s a lot of positive signs because trailers and power units are moving together in the same general direction,” he says. “It’s when they start to deviate that I get a little bit more nervous.”
FTR continues to track the number of new COVID-19 cases reported daily on state and sometimes county levels because the virus is a “huge wild card” for the trucking industry, according to Starks.
In total, the number of new cases reported has been on a downward trend and has started to flatten, but FTR has noticed movement in new cases from the South and the Southwest back into the Midwest.
“That’s concerning for us because the Midwest is so heavy in manufacturing and a lot of what you are all doing could be adversely impacted by that. [New cases] create havoc. They shut down facilities,” Starks says.
“Based on the data we’re seeing right now, we really haven’t seen a second wave but this is a huge wild card. If we see a mutation in the virus and we don’t have a vaccine in place, this could be very disruptive,” he adds.