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ACT Research For-Hire Trucking Index: Pricing and Productivity Indices Fall

March 18, 2019, 07:05 AM
Filed Under: Trucking

The latest release of ACT Research's For-Hire Trucking Index showed a downtick in volume, pricing and productivity, with the supply-demand balance continuing trend, loosening for the fourth consecutive month. The Volume Index returned to negative territory, reaching 47.1 in February, while pricing fell to 48.9. Productivity dropped sharply to 43.0, and the supply-demand balance now sits at 42.7.

Tim Denoyer, ACT Research’s Vice President and Senior Analyst commented, “While respondents noted weather impacted February results, the Pricing Index fell below neutral for the first time since July 2016 amidst soft demand and accelerating pricing. We see evidence here that the laws of supply and demand have not been repealed.”

He added, “The supply-demand balance reading fell from 45.6 in January, and the decline was due to the lower freight Volume Index reading, partly offset by the sequentially lower Capacity Index.”

Denoyer noted, “Both accelerating Class 8 tractor production and slowing freight growth are loosening the supply-demand balance as we near the 2019 contract rate season.”

The February fleet purchase intentions reading indicated an uptick in equipment demand, with 55.5 percent of respondents planning to buy trucks in the next three months, up from 53.6 percent, seasonally adjusted, in January.

Preliminary Used Class 8 Volumes Declined in February

ACT Research also reported Preliminary used Class 8 volumes (same dealer sales) declined moderately in February, falling 5 percent month over month and erasing a portion of January’s 10 percent improvement, according to the latest preliminary release of the State of the Industry: U.S. Classes 3-8 Used Trucks published by ACT Research. However, the report indicated that longer-term comparisons yielded a 20 percent decline compared to February 2018.

Other data released in ACT’s preliminary report included year-over-year comparisons for February 2019, which showed that average prices rose 15 percent, while average miles contracted 5 percent and average age was 3 percent higher.

According to Steve Tam, Vice President at ACT Research, “Generally, low inventory and strong demand increase price, while higher supply and softer demand tend to drive prices lower. The current pricing environment and dealer commentary suggest inventory remains one of, if not the main, limiting factor inhibiting sales volumes.”

Freight Rate Recession Likely
According to ACT Research’s latest release of the North American Commercial Vehicle OUTLOOK, a freight recession is not out of the question, but the easier call is a rate recession as truck supply-freight demand fall out of balance.

“While there is a very low probability and no expectation of an economy-wide recession in 2019, freight-related data points have been sufficiently bad in breadth and duration to note that a freight recession is possible, although unlikely,” said Kenny Vieth, ACT’s President and Senior Analyst. “That said, slower freight growth, an easing of driver supply constraints, the resumption of the long-run freight productivity trend, and strong Class 8 tractor fleet growth will increasingly pressure rates and by extension, trucker profitability in 2019.”

Regarding heavy vehicle demand, Vieth noted, “The rolling-over of ACT’s Dashboard guidance at the end of 2018 suggests today’s order weakness will transition from ‘too much backlog’ to an equipment supply-freight demand imbalance in the near future.”

Despite Vieth’s cautious tenor, he noted the heavy commercial vehicle market continues to benefit from a still-broad spectrum of supply and demand-side triggers, including still-strong carrier profits, desirable new technologies, better fuel economy and for trailers increased demand for drop-and-hook to keep drivers moving.

Regarding ACT’s medium duty forecasts, Vieth said, “Preliminary February net orders were moderately above the current trend. Orders averaging 24,100 units per month for the past six months have diminished from the strong upward pressure they exerted on the forecast in the first half of 2018.”

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