August 30, 2019

ACT: heavy truck and trailer production verges on sudden slump

Market is headed for steep drop in 2020 as U.S. consumer shopping continues to "keep the economy out of the ditch" despite trade war, firm says.

By DC Velocity Staff

Pressured by trade and tariff concerns, the slumping heavy truck and trailer markets—and increasingly the medium duty market as well—are heading for steep drops in 2020, even as the slow-growth U.S. economic outlook remains largely unchanged, according to ACT Research Co.

ACT warned of a looming "correction" in the sector, which is an economics term referring toa rapid change in the price of a commodity, usually defined as a decline of 10 percent or greater from its most recent peak. The warning follows a similar forecast by ACT in July, when the group said that demand for orders of new commercial vehicles is faltering fast after a strong 2018.

Although several key freight-generating sectors of the economy are taking a "pause" in their growth, strong retail demand means that the U.S. consumer "remains well positioned to keep the economy out of the ditch" for the near to mid-term outlook, the Columbus, Ind.-based analyst and forecasting firm said today.

Current Class 8 production strength continues to cause an upward drift in 2019 expectations that is nibbling away at 2020 potential, ACT said. The firm  pointed out that this year\'s additional inventory accumulation will ultimately be paid back in faltering future production levels.

"The forecast scenario that we have been calling for appears to be playing out on schedule in the second half of this year, and if build rates are maintained longer than expected, there might still be some upside in the 2019 production forecast," Kenny Vieth, ACT\'s president and senior analyst, said in a release. "However, large new inventories and deteriorating freight and rate conditions suggest erring on the side of caution remains the right call. When the change comes, it is likely to come fast, and we are encouraging our subscribers to be prepared for down weeks starting as early as Q4."

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