IN HIS TRUCK EQUIPMENT MARKET OUTLOOK presentation, NTEA director of market data and research Stephen Latin-Kasper laid out his forecast pros: moderate interest rates and inflation, low unemployment, high productivity, and increased capital expenditures, trade, and government spending.
“There are a lot of good things going on,” he said. “The long-run economic fundamentals are pretty good. We don't see it as being another time period like '00-'01-'02. The pre-buy is going to cause a lot of trucks that would've been bought in '07 to be bought before that. So a lot of demand for trucks is going to dry up in '07 as a result. But that won't last. The economic fundamentals going forward are solid.”
Latin-Kasper said that in the wake of hurricanes Katrina and Rita, he talked to a few dump-body manufacturers who told him they're receiving huge orders.
“They can't turn them out fast enough,” he said. “The cleanup workers have to put the muck into something to haul it away. That's where the process starts. As that rebuilding process in the Gulf Coast goes forward, different kinds of equipment are going to be bought up and used. A lot of existing equipment was destroyed. Insurance companies are not going to pay for vehicles with water that was above the floorboards because the electrical systems are shot and there's no point trying to fix it. So even new equipment is going to have to be replaced.”
Latin-Kasper anticipates “significant growth” in factory shipments of trucks and truck chassis in 2005 — about $72.3 billion, which would represent an 11.2% increase of almost $8 billion over 2004. Overall, the total for transportation and truck equipment shipments will increase from $98 billion to an estimated $116 billion.
Truck equipment shipments are forecasted to increase 23.1%, from $35.4 billion in 2004 to $43.67 billion this year.
Class 2 truck sales were down 0.8% through the first seven months of the year, despite discounting. Class 3 sales were up 89.1%, but Latin-Kasper suspects that because the increase was 175% in July and 127% in August over the same months a year ago, “there's reason to believe a couple of companies have reworked the way they're reporting.” Class 7 sales were up 27.2%, with Class 8 up 32.6%.
Medium-duty truck production has decreased 20% since the middle of '04, while retail sales have increased 10% in that span.
“Now is not the time for inventories to be decreasing, especially in the medium-duty side of the market,” he said. “There's still a lot of room for growth between the end of '05 and '06.”
Heavy truck production has been staying comfortably ahead of sales — almost 10% since the middle of '03.
“We're seeing a little bit of expansion,” he said. “Pre-buy is pretty much under way and we're going to see more and more of the pre-buy effect moving into '06. That's being anticipated as the rate of growth in productivity separates from the rate of growth in sales.”
Latin-Kasper said he expects a continued upward trend in electric utility production compared to business truck production.
He said state and local governments are “finally climbing out of the fiscal problems that started in '03 and carried over to '04. They're trying to make up for lost time. You have to build the roads and you have to maintain the roads. Potholes get local politicians unelected. It's something they pay close attention to. Construction expenditures are highly unlikely to go down. Growth may slow, but it doesn't usually become negative. This is a good place to be in terms of getting part of your product line diversified to getting into state and local expenditures on construction with equipment they use for that purpose.”
Steel prices continued to fall. In the second quarter, decreases were experienced in carbon steel scrap (31.7%), hot-rolled sheet and strip (16.3%), hot-rolled bars, plates, and shapes (1.9%), and steel pipe and tubes (1.4%). Over the past year, carbon steel scrap was down 22.3% and hot-rolled sheet and strip was down 8.6%, while hot-rolled bars and plates were up 12.1% and steel pipe and tubes were up 10.9%.