N.A. Commercial Vehicle OUTLOOK

1. Economy - Given the latest guidance from Chairman Powell, we are projecting the next federal funds rate increase will be another 25bps, pushing the target federal funds rate to 4.75% to 5.0%, keeping the yield curve inverted and putting additional downward pressure on interest-rate sensitive sectors like the housing market.

2. Medium Duty - Altogether, the Medium Duty market finished 2022 with a whimper. Most of the time period comparisons for the various market indicators signaled weakness or contraction. Sales, the final arbiter, finished in typically strong fashion, but ended 2022 about 5% lower than in 2021.
3. Class 8 - In spite of what seems to be a stumbling freight picture, higher financing costs, and increasingly restrictive credit availability, we continue to see healthy sales and build trends into 2023 that will top long-term average results for heavy-duty trucking. It is shaping up to be the best-ever recession for NA Class8 trucking, at least as far as 2023 is concerned.

4. Trailer - December net trailer orders were even more robust than in recent months, rising 115% y/y (+46% m/m). Orders reached the second highest monthly total ever, falling only ~500 units short of the record set in September 2018.

5. Used Truck - Same dealer Class 8 retail truck sales jumped 16% m/m in December. Activity typically sees a moderate increase (≈7%) in December, so the increase was directionally consistent with expectations.

State of the Industry: N.A. Classes 5-8 Vehicles

January heavy-duty (HD) orders were relatively weak, but it remains to be seen whether this represented a pause after robust year-end orders, or the beginning of a more broad-based pullback in demand. Notably, both HD and medium-duty (MD) seasonally adjusted retail sales were robust. Heavy-duty retail sales (SA) rose 29% y/y to 29,200 units (23,765 nominal). The 1,389-upd rate (SA) was 22.9% ahead of the year-ago rate, 15.5% above the full-year 2022 average, and up 4.5% m/m.”