ACT Research announced updates to its GDP and trailer equipment demand forecasts in two reports this week.
In its Commercial Vehicle Dealer Digest, the firm reported a slightly raised 2022 GDP forecast despite current economic activity, but analysts continue to expect a decline in 2023. Conversely, ACT noted in its quarterly trailer components forecast that recent weak economic numbers and higher interest rates do not seem to be impacting the commercial vehicle sector in any meaningful way as demand remains strong.
Regarding the economy, ACT’s President and Senior Analyst Kenny Vieth says the Federal Reserve will continue to aggressively raise interest rates so long as inflation remains elevated.
“Not only has the Fed telegraphed this aggressive stance, but economic 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.
He goes on to say that any downturn in commercial vehicle demand will be driven by carrier profit changes but could be offset by pent-up demand and pre-buying ahead of the next EPA regulation introduction.
“As we have long argued, carrier profits are the critical element in vehicle demand. Profits in 2023 are anticipated to be lower, but even modeling a sharp downturn, the worst since 2007, truckload (TL) net margins are projected to be the fourth best on record,” he says.
The company's trailer forecast also shows relative strength.
“Recent discussions indicate U.S. trailer OEM business conditions are on-par with September and seem to be getting better,” says Jennifer McNealy, director, commercial vehicle market research and publications. “Demand remains healthy, cancellations are low, and material/component supply-chain constraints are narrowing. With the availability of 2023 build slots varying widely by OEM, complicated by already long backlogs, customers’ ability to place orders is limited.”
McNealy also notes ACT is monitoring the impact inflation could have on OEMs and production.
“Difficulty in projecting part and material prices has made it tough for manufacturers to set firm prices for trailers currently on order,” she says. “That said, most are re-pricing orders with customers as production is set to commence.”
She also says business conditions reporting indicates the supply chain challenges and labor market crunch remain major issues for OEMs and will continue to be issues in 2023. “We expect production levels to remain relatively constant in the near term.”