ACT Research announced Tuesday it has slightly amended its North American commercial vehicle market forecast down this month, citing stubborn inflation and the Fed’s continued firm action toward bringing it down to its 2 percent target.
According to ACT’s President and Senior Analyst Kenny Vieth, there is already some commentary in the economic sphere that the Federal Reserve is moving monetary policy too fast, which could increase the likelihood of an overshoot that leads to a recession. But Vieth also notes “the data suggest the Fed has little choice.
“It is our view the Fed will continue on its course of tighter monetary policy, as still deep-pocketed consumers and businesses drive demand for labor in structurally constrained labor markets,” he says. “Employment metrics suggest there is little room to rein in wage inflation outside of aggressive monetary policy actions that reduce demand. Job growth is moderating, but September’s job gains were still 38 percent above the 2011-2019 average of 190,000 jobs per month.”
As for the commercial vehicle space, Vieth says the critical factor in forecasting for 2023 is trying to answer the question of ‘When do lower freight rates compress carrier profits sufficiently to kill the cycle?’
“Our current thinking is that the negatives begin weighing on demand by the second half of 2023,” he says. “However, with prebuying ahead of the California Air Resources Board’s (CARB) expensive Clean Truck mandate late next year and still healthy carrier margins early in the year, a case can be made that demand strength will be sustained through 2023. Higher volumes in 2023 would come at the expense of vehicle demand in 2024.”