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Supply chain still limits OEMs' ability to meet demand: ACT

June 21, 2022
New truck production exceeded expectations in May. But disruptions from Russia and China, inflation, high interest rates, and the increasing likelihood of recession all show that trucking will struggle, the research group predicts

Despite supply chain woes easing early this year and new truck production exceeding expectations in May, disruptions from Russia and China, rampant inflation, high interest rates, and the increasing likelihood of recession all indicate a continuing struggle for the industry, according to the latest data from ACT Research.

“Russian commodities remain locked out of Western markets, Ukraine remains besieged, and China continues to struggle with COVID and lockdowns," said Eric Crawford, ACT Research’s vice president and senior analyst. The current market amid international uncertainties have caused OEMs to take a conservative approach, limiting their number of build slots.

“The battle against inflation is global. U.S. inflation continues to accelerate, prompting the Fed to lift the Fed Funds rate 75 basis points this week, the largest increase since 1994, and markets and economists are increasingly predicting a U.S. recession in 2023,” Crawford said.

When asked what this all means for commercial vehicle markets, he explained, “While Classes 5-8 production exceeded lowered expectations in May and build plans were largely unchanged, supply chain risks remain elevated. Moreover, we believe the likelihood of a U.S. economic recession is growing and probability of a mild recession is now about as likely as that of our base-case scenario.”

“Backlogs remain long and order volumes remain constrained," Crawford said. "Until build rates find additional traction, orders will largely mirror production levels, but the steep decline in truckload spot rates in recent months will soon impact vehicle demand.” ACT has also reported that an oversupply of used trucks could lower truck prices, which last month were 66% higher than May 2021.