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Recession? Some factors mitigate downturn: ACT

Aug. 12, 2022
ACT Research analysts shared that possible mitigating factors of the inbound recession, including probability and vehicle demand, have been incorporated into their downturn forecasts

After shifting forecasts last month to incorporate an inbound recession, ACT Reseach's changes to this month’s forecast were mostly characterized by smaller adjustments, both higher and lower, as the shape of their downturn forecasts were fine-tuned. That's according to ACT’s latest release of the North American Commercial Vehicle OUTLOOK.

“We are raising our 2022 forecast, reflecting better-than-expected production in June, and some easing of supply conditions, although we believe industry production will continue to be capacity constrained," Kenny Vieth, ACT’s president and senior analyst, said. "Our now-higher forecast remains incrementally below the OEMs’ aggregate industry build plan.”

Regarding Federal Reserve policy, Veith suggested that "persistent rate tightening" represents a downside risk to the current forecast. As for next year, the combination of falling freight rates, higher carrier operating costs, rising interest rates, and falling used equipment valuations represent increasing risks to vehicle demand.

"However, while we are marking down our forecast, 2023 is still projected to be a very good year, just not as good as we were expecting, as tailwinds are blowing less hard amid rising headwinds," he said.

Vieth concluded by discussing the potential impact to commercial vehicle markets, noting "at least three" factors that mitigate a more severe downturn.

“Carrier profitability is strong, with profits at all-time record levels in 2021, and full-year TL fleet profits are pegged at second-best ever levels in 2022," Veith said. "Vehicle demand remains healthy, if moderating from here, with pent-up demand expected to support demand into 2023. Finally, some prebuy activity is anticipated prior to the implementation of CARB’s Clean Truck mandate, helping to support activity into year-end.”

The N.A. CV OUTLOOK is a robust report that forecasts the future of the industry, looking at the next 1-5 years, with the objective of giving OEMs, Tier 1 and Tier 2 suppliers, and investment firms the information needed to plan accordingly for what is to come. The report provides a complete overview of the North American markets, as well as takes a deep dive into relevant, current market activity to highlight orders, production, and backlogs, shedding light on the forecast.