NTEA’s OEM month-to-month chassis gross sales outlook is presently anticipating 2022 to be flat total in comparison with 2021. The forecast for 2023 requires gross sales to develop by roughly 4% total, with sluggish progress by means of 2026.
Main indicators round GDP, residential funding, unemployment price, private expenditures, and the buyer value index are pointing to a recession within the U.S. this 12 months — however how extreme and long-lasting will or not it’s? And the way will these elements have an effect on the business truck and gear business market?
A dialogue of those points shaped the premise of the webinar “Understanding Market Dynamics Influencing the Work Truck Trade in 2023,” introduced by NTEA’s economist Steve Latin-Kasper on Jan. 11.
Listed below are the important thing takeaways.
GDP Will Go Destructive, However When?
Final 12 months was characterised by unexpectedly sturdy GDP progress within the third quarter. The fourth quarter of 2022 is anticipated to indicate slower GDP progress, mentioned Latin-Kasper, senior director of market information and analysis for NTEA, the affiliation for the work truck business.
Transferring into 2023, there’s consensus that in some unspecified time in the future GDP will go flat to barely unfavorable versus 2022, although the timing is in query — some say the primary two quarters, whereas others are pushing the recession additional out.
Nonetheless, progress is anticipated within the different quarters, in order that for 2023 total, GDP will likely be on par or barely above 2022 numbers.
Labor Market Will Stay Tight
Latin-Kasper made the purpose that the U.S. was already heading right into a recession in This fall 2019 earlier than the pandemic hit. He referenced how unemployment insurance coverage claims information fluctuated in tandem in each This fall 2019 and This fall 2022.
“(This) tells us that from a labor market perspective, we’re again to what we had been feeling within the fourth quarter of 2019,” he mentioned. “Pre-pandemic, we had been already experiencing the issues which can be related to a decent labor market.”
Unemployment claims stand at about 3.7%, as of the webinar date. That’s at, or really beneath the total employment price, he mentioned. Claims are anticipated to rise, however not by a lot.
The unemployment price has an inverse impact on inflation: When unemployment goes up, inflation goes down and vice versa.
The speed of inflation peaked at simply over 9% close to the tip of Q2 2022 and has been falling since. (The inflation price fell for the sixth straight month in December to six.5% on an annual foundation.)
That is excellent news, however not but ok to maneuver the needle on rates of interest. The Federal Reserve received’t again off potential rate of interest will increase till inflation decreases to the Fed’s goal price of two% to three%. This probably received’t occur till at the least midway by means of 2023 or into the third quarter, Latin-Kasper mentioned.
In monetary phrases, and never adjusted for inflation, the U.S. work truck business is anticipated so as to add one other $10 billion to the market in 2023. Nonetheless, solely about 4% of that will likely be unit progress, with the remaining as a result of inflation.
Wanting on the business truck and gear business market valuation when it comes to {dollars}, Latin-Kasper confirmed that the market elevated from $146 billion in shipments in 2021 to about $158.6 billion in 2022 and is anticipated to extend to virtually $170 billion for 2023. This progress is predominantly primarily based on increased car costs pushed by inflation, nevertheless.
On a unit foundation, 2022 is anticipated to finish the 12 months flat in comparison with 2021. Whereas 2023 will add one other $10 billion to the market, solely about 4% of that will likely be unit progress, with the remaining as a result of inflation.
Truck Gross sales Trending Up, Vans Lagging
Month-to-month OEM gross sales and cargo information present optimistic current tendencies, although it varies by class teams.
Class 2 to Class 5 skilled yo-yo swings earlier than the pandemic, after which the pandemic produced even higher troughs and peaks. Shipments in 2 to five have been trending optimistic since Q1 2022. Wanting on the annual proportion change baseline, Latin-Kasper expects 2 to five gross sales and shipments to cross into optimistic territory in Q2 2023.
Gross sales information for Class 6 to Class 8 reveals the same slide pre-pandemic, however a extra dramatic drop in 2020 and a extra speedy restoration. When provide chain disruptions kicked in, Courses 6 to eight by no means dipped beneath the baseline. Latin-Kasper expects 2022 to finish basically flat relative to 2021 with continued progress on this section by means of 2023, adopted by a petering out of gross sales and shipments.
The business van section was extra acutely affected by the shortage of availability of semiconductors and components, because the scenario compelled OEMs to park tens of 1000’s of vans. As components grew to become obtainable, shipments got here out in chunks.
Van gross sales and shipments have been trending up because the starting of 2022, however the important thing pattern is that demand remains to be nicely forward of provide. Subsequently, the van section isn’t anticipated to achieve the pre-pandemic gross sales baseline of 30,000 items per 30 days for just a few years.
Relating to gross sales and shipments total, “The excellent news is that we’re coming off the underside,” Latin-Kasper mentioned. “Gross sales and shipments are headed again up in the correct path.”
Commodities Costs a Combined Bag
Latin-Kasper demonstrated value actions of assorted commodities, together with diesel, metal, and housing.
Diesel costs spiked dramatically in 2022 and have solely lately tapered barely. The worth will increase for freight haven’t stored up with diesel, which have squeezed carriers’ revenue margins.
This squeeze usually would make carriers assume twice about shopping for new tractors, however demand is thus far forward of provide — and can stay so by means of 2023 — that this dynamic isn’t as impactful as it will be in any other case.
Metal costs — a very good indicator of how shopper costs are more likely to transfer — have been on a downward pattern, although with an upward blip as a result of Russian-Ukrainian warfare. Costs are anticipated to dip to 2018-2019 averages by mid-2023.
Housing begins have already fallen steeply and can trough in 2023 as rising rates of interest dampen first-time homebuyer’s means to get into the market. Restoration will occur towards the tip of the 12 months.
Nonetheless, the multifamily unit market is holding up pretty nicely, as these buildings are wanted for the underserved rental market, Latin-Kasper mentioned.
NTEA is predicting a slight improve in chassis gross sales for the 2023 calendar 12 months, with the business van, low cab ahead, and standard segments experiencing probably the most progress over 2022. Nonetheless, the van section isn’t anticipated to return to pre-pandemic gross sales numbers for just a few years.
Minor Progress in Chassis Gross sales for 2023
NTEA’s OEM month-to-month chassis gross sales outlook is presently anticipating 2022 to be flat total in comparison with 2021. Taking a look at gross sales by chassis section, the large progress winners in 2022 had been strip and cutaway chassis (11.5% and 14.2% vs. 2021), together with Class 8 tractors (11.1%). Business vans (-9.6%) had been notably negatively affected.
The forecast for 2023 requires gross sales to develop by roughly 4% total. Progress is anticipated to sluggish to 2.5% and 4.5% within the strip and cutaway segments, whereas the traditional and cabover segments (6% and 4%) will choose up the tempo.
Provide chain enhancements could have an outsized optimistic impact on the business van section in 2023, with 7.5% progress anticipated. (Noting once more that van gross sales will take for much longer to normalize.) The quickest rising weight class segments for 2023 will likely be Courses 4 and 5, adopted by Courses 2 after which 8.
By way of an extended view of recent business truck registrations, count on sluggish progress by means of 2026.
Excessive Demand Outweighs the Negatives
Latin-Kasper introduced how consensus outlooks on main indicators have modified from six months in the past. Up to date forecasts from numerous sources such because the Nationwide Affiliation for Enterprise Economics (NABE) have trended unfavorable since then.
As an example, NABE’s outlook in June 2022 predicted GDP progress of two.1% in 2023. The up to date forecast predicts 0.3% progress.
Nonetheless, the sky isn’t falling, because the market is rife with mitigating elements: Inflation is previous the height and on a downward slope, although we count on to be in a rising rate of interest setting by means of at the least the third quarter of this 12 months.
Whereas the expansion charges of shopper and capital expenditures are more likely to sluggish, they received’t go unfavorable.
Unemployment stays uncharacteristically low, which is a hedge towards a full-blown recession. Nonetheless, labor market imbalances stay a long-term drawback as fewer folks enter the workforce and Child Boomers retire.
As China is a serious OEM provider, plant closures as a result of Covid might have a unfavorable impact, but it surely’s a low chance proper now. Political uncertainty with the Russia-Ukraine warfare remains to be a query mark.
Latin-Kasper concluded by reasserting that the approaching recession will likely be shallow and short-lived. The expansion quarters in 2023 will outweigh the unfavorable quarters, which is able to produce a barely optimistic comparability total to 2022.
“(That is) hopefully the ultimate a part of the rebalancing act that we have been engaged in because the pandemic hit again in March 2020,” he mentioned.
Most significantly, fleet demand remains to be nicely forward of provide. Chassis availability is a unfavorable, although recovering. “Provide chains are enhancing, however extra slowly than any of us would really like,” Latin-Kasper mentioned.
Diana Martin is the Chief Editor at Wulfenite Creations, where she leads a team of talented writers and ensures the publication of high-quality content on the latest in technology and innovation. With over 15 years of editorial experience, Diana has a deep understanding of the tech industry and a passion for storytelling. Her expertise lies in curating insightful articles that both inform and inspire readers. Outside of the newsroom, Diana enjoys attending tech conferences, reading sci-fi novels, and mentoring young journalists. Follow her work for expert analysis and in-depth coverage of emerging tech trends.
