Rising inflation, parts availability and COVID-19 were some of the topics discussed during Wednesday’s Heavy Duty Manufacturers Association (HDMA) Pulse Webinar.
“We keep getting comments that members are paying well over index level just to procure raw materials. We can look at the impact [of inflation] is having on business, so that’s what we decided to do here in our September Pulse,” said Richard Anderson, HDMA director, market research and analysis.
The August Pulse poll asked member respondents what’s causing the greatest problems for their business. Nearly 80 percent said inflation of materials, components, freight and labor, while 21 percent reported the availability of materials, components, freight and labor, Anderson said.
ACT Research Principal of Analysis Jim Meil said the trucking industry and Main Street are sensitive to inflation.
“You can talk about energy prices, steel prices, supply shortages, freight costs, semiconductors, electronics, steel, natural gas — the list goes on and on. [Inflation is] a front and center concern in the world. But if you look at Wall Street or the [Federal Reserve], it’s on their radar but a remote concern,” Meil said.
Anderson said pressure from inflation is broad-based across the entire supplier community and there is very little of their business that isn’t going up in cost.
“Concurrent with this inflationary environment we have seen an uptick in COVID cases, so we took this opportunity to ask a similar question. How significant an impact is the rise in infection rates, ongoing responses from the government and your customers having on your business?” Anderson said. COVID-19 is having less of an impact than inflation, he adds.
The poll measured six different aspects of the business affected by the pandemic. All six fell in the moderate range: overall profitability, sales operations, manufacturing operations, return to office, planning for 4Q21 and planning for 2022.
“This time last year these numbers were much higher, so there is good news here. This isn’t to say the industry is going to absorb the impact of any shutdowns that come from COVID — they certainly would be a cause of greater disruption,” Anderson said.
Meil said, “We have had the fourth wave. We don’t want to dismiss [COVID] as a planning concern as we move into the fourth quarter and into 2022. Given the year and half that has gone on with regard to coping with COVID, we have medical solutions and better practices with regard to workplace safety and other mitigation programs. I don’t want to minimize COVID as a problem but, over the course of time, we’re learning how to deal with it and that’s good news.”
From a demand perspective, ACT Vice President and Analyst Steve Tam says, “Things just don’t get much better than in our industry right now. It’s simply that good. The constraining factor at this point is drivers, quite honestly.”
Following a weak 2019, there has been a very steady rise in truck orders. Intake in the Class 8 market is almost 160 percent higher than it was for the first eight months of last year, Tam said.
“Right now, as we enter what is traditionally the beginning of the order season, we’ve got solid demand, there’s just no question. You see a parallel with medium-duty,” Tam said. “The trailer side of the equation is a little bit different story. It is much more sensitive to the inflation of raw materials, for example. Many of the trailer manufacturers have been reluctant to make long-term commitments vis-à-vis accepting orders for delivery in months down the road. You’ve seen that order intake somewhat restrained.”
From ACT’s perspective, it all goes back to balancing capacity and ACT thinks that’s going to be mostly an orderly normalization and not a cliff-type event.
“You can see we’re actually at the point now where we’re starting to rebalance. If everything plays out the way we see it right now, full equilibrium [could be reached] in the second half or the middle part of next year — but that’s predicated on drivers coming back to the workforce or finding new drivers to take over those trucks that don’t have anybody in them,” Tam said.
As with all the Pulse webinars, HDMA asked in its poll for the three most significant factors affecting restarting normal business operations. At 40 percent was raw material and semi-finished good procurement. Thirty percent of respondents reported labor force readiness and availability. One-fifth of respondents said one of the biggest challenges is inbound/outbound shipper availability and cost.
