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FEBRUARY 2023 DRIVING DATA

Key Observations From February's Reports

 

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“While down year-over-year, the December-ending Class 8 backlog represents the fourth highest year-end backlog on record. With this as context, our call for strong production in 2023 is hardly a stretch. That said, we do expect softening, as lower freight volumes and rates, higher costs, improved equipment availability, and the gradual exhausting of pent-up demand begin to exert downward demand pressure.”

-Kenny Vieth, President, Sr. Analyst

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.

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Freight Forecast: U.S. Rate & Volume OUTLOOK

1. A mild freight downturn is likely to persist as pent-up demand slows.

2. We see the bottoming phase in the spot market as labor capacity slows.

3. The shipments components of the Cass Freight Index fell 3.2% /m/ in January.

4. ACT’s For-Hire Driver Availability Index was essentially flat from November to December.

5. Class 8 trucks preliminary orders fell in January from December numbers.

February For-Hire Trucking Index -Driver Availability
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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.”

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State of the Industry: U.S. Used Truck Classes 3-8

Used Class 8 retail volumes (same dealer sales) increased 12% m/m in January. Average mileage increased 8% m/m, with average price down 7%, and age up 1%. Longer term, average price and volumes were lower, with age and miles higher y/y.

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State of the Industry: U.S. Trailers

Reflecting a lower build rate, January’s backlog-to-build ratio increased to 9.9 months, after averaging ~8 months since August of 2021. That said, the BL/BU for total trailers decreased to 8.1 months when seasonally adjusted. Either way one looks at it, the industry is essentially committed into the beginning of Q4’23. 

Total Trailer Backlog & BacklogBuild Ratio January 2014-January 2023
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