Again, as a result of the COVID-19 pandemic, ACT Research began its 65th Seminar via a virtual platform, with a panel discussion about the current state and future of U.S. economics. Panelists included Jon Horvath, Director Economics and Marketplace Dynamics at C.H. Robinson, as well as ACT’s Principal, Industry Analyst, Jim Meil, and Chief Economist, Sam Kahan.
Kahan noted, “The economy continues to approach normality, and the current strong pace of real GDP is likely to slow as time progresses to a still-solid pace. That said, COVID and fear of inflation, with regional and industrial differences, remain challenges.”
He added, “Freight and transportation continue to shine, but how component supply chains, volumes, profitability, innovation and labor will respond is tomorrow’s focus.”
Regarding inflation, Meil explained, “The near-term outlook is faced with two principal threats, first and foremost, the fourth wave of COVID due to the Delta variant, and a resurgence of inflation. Even if the inflation issue is transient from a macro-perspective, it will leave its mark on the trucking and transportation industry.” He added, “Sources of the inflation threat are front and center for trucking and transportation. Energy prices at the end of August are 50% higher than they were at this time last year, even if oil prices have retreated from July highs. The semiconductor problem, supply and prices, is a well-publicized issue impacting a number of industries. Steel prices are two times higher now than they were at the start of 2021. Whether or not they retreat, they increase risk and uncertainty for the next four to six quarters.” Additionally, Meil commented on the global picture, saying, “There are clear similarities between the North America and global scenes – positive tailwinds for Europe, Japan, China, and much of South America, but potential problems as the world deals with the COVID threat.”
Regarding the North American medium-duty market, Steve Tam, ACT’s Vice President, said, “Demand is on fire in the medium duty market, but supply is dampening down the flames. Orders are up almost 75 percent year-to-date, with 2021 well poised to be the best order year in history.”
He added, “Despite red hot demand, the supply chain’s inability to provide all of the necessary parts will keep a lid on production and sales in 2021 and into 2022. NA Classes 5-7 retail sales are expected to total about 255,000 units in 2021, increasing to 265,000 in 2022.”
Tam also commented about the impact of electrification and autonomy for this CV sector, saying, “Thanks to a better alignment of current battery technology and capability, light and medium duty vehicles are expected to see greater adoption of electrification than their heavy-duty counterparts. Conversely, Class 8 vehicles are expected to have a greater cost advantage than light and medium duty vehicles from the implementation of autonomous technology, making the heavier vehicles the most likely innovators.”
Frank Maly, ACT’s Director, CV Transportation Analysis & Research shared a review of the US trailer market. “Fleets have a long-term balance in how the ratio of trailer and truck orders normally proceed. The reluctance of trailer OEMs to book orders in recent months has pushed trailer orders well under their normal level. That pent-up demand, along with the industry’s normal upcoming order season, has set up the potential for a flood of orders to be placed before year-end.” Maly added, “Trailer OEMs continue to struggle to ramp production in response to current fleet demand. As a result, current orderboards stretch to early April 2022, on average, at current production rates. Dry van and reefer backlogs extend even further.”