ACT Research: latest data indicate a less severe economic downturn for 2023

The Federal Reserve’s campaign to bring inflation under control may be bearing fruit, indicating a less severe economic downturn for 2023 thanks to moderating core personal consumption expenditures (PCE), slowing jobs growth, and decelerating wage inflation, according to the freight analyst firm ACT Research.

That forecast is the latest measure to show that inflation continues to slowly drop from its 40-year high as the nation reaches the end of a pandemic-driven shipping surge. Ocean freight and air cargo volumes have also slumped by their latest measures as logistics activity starts to slow.

Columbus, Indiana-based ACT drew its assessment from the firm’s North American Commercial Vehicle Outlook, which forecasts the future of the industry for the next 1-5 years based on market conditions for medium and heavy-duty trucks/tractors and trailers, the macroeconomies of the U.S., Canada, and Mexico, publicly-traded carrier information, oil and fuel price impacts, freight and intermodal considerations, and regulatory environment impacts. 

“The critical factor in forecasting 2023 is identifying the point at which lower freight volumes and rates, coupled with higher borrowing costs, compress carrier profits sufficiently to end the cycle,” Kenny Vieth, ACT’s president and senior analyst, said in a release. “Our current thinking is the negatives begin to weigh on orders as soon as 1H’23, and more meaningfully by 2H’23. However, with healthy backlogs, early 2023 carrier profitability strength, and the potential for a CARB-induced prebuy in California, there is a compelling case to be made for production volumes to be sustained at end-of-2022 levels through all of 2023.”

That gradual decline would mark a softer impact that previous downturns, he said. “Reflecting softer macro and freight trends, ACT’s forward-looking Tractor Dashboard remained in negative territory in November. While the dashboard has signaled incoming softness since March, the low single-digit negative readings seen in 2022 are mild, relative to the double-digit negative prints witnessed in late 2015 and early 2019,” Vieth said.