As we move through the fourth quarter of 2013, we seem to be collectively wondering if the U.S. economy will ever again reach its historical norm growth rate of 3% and how that will impact the work truck industry. Consumers just don’t seem to be able to shake off the fear lingering from the recession of 2007-2009. In fact, recent polls indicate that a substantial number of U.S. consumers think that the country is still in recession. They’re wrong, but fear trumps logic in the case of economic growth. It doesn’t matter how wrong they are; what matters is that fear causes consumers to spend less than they would otherwise, and this leads to slower economic growth.

It’s not just about fear, though. There is a real problem that goes along with the emotional torpor, and that is a 30-year long slide in income growth that began in the early 1980s. As the U.S. economy emerged from the recessions of 1980, 1982, 1991, 2001 and 2007-2009, the rate of growth in personal consumption expenditures declined each time. It’s difficult for consumers to spend more, or faster, if their incomes can’t support the spending.

Between 1980 and 2007, increased debt was the response to demand that couldn’t be supported due to real income stagnation. However, one can only incur so much debt before payments on the debt become unsupportable as a result of stagnating incomes. From 2001 to 2008, massive increases in consumer, business and government debt, along with unsustainable real estate prices, led to a financial debacle. This turned what likely would have been a mild recession into the longest economic downturn in the U.S. economy since the 1930s.

One ongoing issue resulting from the steep, long-lasting recession is a U.S. labor market that — as of the third quarter 2013 — remains badly imbalanced. Four years into the current cyclical expansion, the unemployment rate remains above 7%. Economists seem to agree that the fear to which many consumers cling is unlikely to dissipate until the unemployment rate falls below 7%.

Already low consumer and business confidence levels weren’t helped by the political and economic uncertainty created by the federal government shutdown and brinksmanship regarding the U.S. debt ceiling. Low confidence levels, which cause slow growth in consumer and capital expenditures, are driving U.S. gross domestic product (GDP) forecasts of less than 2.5% for 2013. The good news is that those same forecast panels generally agree that U.S. GDP growth is likely to reach 3% in the third or fourth quarter of 2014.

The Federal Reserve is doing everything it can to help by keeping monetary policy loose. At recent meetings, the Fed made it clear that quantitative easing (its current policy of buying bonds) would continue into 2014, and that it would keep the federal funds rate target near zero (below zero when adjusted for inflation) probably until the fourth quarter of 2014, or longer if deemed necessary.

Some Fed officials are concerned that current monetary policy is a bit too loose. On the other side of the policy debate are economists who remain more concerned about deflation than inflation. However, as of the end of the third quarter, the seasonally adjusted annual rate of inflation was about 1.5%. That was within the Fed’s target range of 1% to 2%, and indicates that monetary policy is about right. If consumer and business confidence levels start to improve, the Fed will almost certainly tighten policy sooner than currently planned. It just doesn’t look like that is likely to happen, though.

While it’s true that the U.S. and global economies are not growing as fast as anyone would like, it’s also true that they are growing. The media tends to minimize that, and consequently, the fear is exacerbated. Another point well worth keeping in focus is that economic leading indicators, such as the amount of freight shipped, housing starts and the yield curve, all indicate more growth. This is good news, and it’s even better news for the work truck industry — which tends to grow faster than GDP during economic expansions. While U.S. GDP was growing at about a 2% rate for the last two years, work truck industry sales grew about 10% in 2012, and about 5% in 2013.

The rate of growth of work truck industry sales slowed in the second half of 2012 and remained slow for most of the industry through the first quarter of 2013. Sales picked up in the second quarter of 2013, relative to the previous quarter and the second quarter of 2012. As of June, according to NTEA’s OEM Monthly Statistics Program, U.S. sales of box-off, straight truck chassis were up 4.1% compared to the first half of 2012. As is usually the case, there was quite of bit of divergence in growth rates among the various segments of the industry in 2013. Strip chassis sales grew 35% through June, which was the highest cab segment growth rate by far. At the other end of the scale, cab over engine type chassis sales declined 10.7%. Conventional and cutaway sales grew 2.1% and 0.7%, respectively.

When segmented by class (gross vehicle weight rating), there was also significant divergence in growth rates. The clear market leaders in the first half of 2013 were Classes 3 and 5, which grew at rates of 31% and 11%, respectively — the only two classes to grow at double-digit rates. Classes 6 and 7 grew less than 5% in the first half, while Classes 2, 4 and 8 all declined. Sales of Class 8 straight trucks declined 11.6%, while tractor sales declined 14.6%.

The growth rate divergence is due to many factors — primary among them is the fact that different applications for trucks grew at different rates. Those companies in the work truck industry that were focused on the energy markets and large fleets in most markets did well. Companies focused on the construction and state/local government markets likely didn’t do as well, which begs the question: Since the construction sector started growing again in 2012, why hasn’t it contributed more to the growth of truck sales?

The short answer is that many construction fleets had most of the equipment they needed when their sales started improving in 2012, and they haven’t used this same equipment extensively since 2007. Their trucks, and the equipment installed on them, were old, but didn’t have a lot of miles on them. They didn’t need to significantly increase their capital expenditures between 2012 and the third quarter of 2013. We may see the pace of truck sales to the various construction industries increase as we approach the end of the year, especially those related to residential markets, but it is unlikely that the pace will increase substantially until the second or third quarter of 2014.

Another question: Why haven’t truck sales to state and local governments been better this year since tax revenues started increasing in 2011? The short answer is that they are still paying off the debt incurred as a result of the recession. State and local governments, unlike the federal government, are required to pay off their debt prior to increasing expenditures on budgetary items like trucks and equipment. This situation will likely begin improving in 2014, but probably not enough to have a significant impact until 2015.

The construction sector of the economy and state/local governments account for 35% to 40% of total work truck sales in the United States. It’s hard for an industry to grow when roughly 40% of its application markets aren’t growing. Despite this, the replacement demand from other application markets in 2011 and 2012 allowed for good growth in the work truck industry the last two years. 2013 will likely be the fourth consecutive year of growth for the industry.

As of the third quarter of 2013, the work truck industry has plenty of room to grow. The industry peaked in terms of monthly unit sales in the first quarter 2006 at roughly 50,000 units per month, and then proceeded to fall all the way to roughly 11,000 units per month in the first quarter of 2009. The good news is that about 20,000 units of the roughly 40,000 unit per month fall from peak to trough has been recovered. The better news is that a big chunk of the rest of it is likely to be recovered in the next two to three years.

Much of that positive expectation has to do with the forecast for the U.S. construction sector. The forecast for residential housing starts is about 1.1 million units; up from about 950,000 units in 2013. Nonresidential construction expenditures are expected to increase as well. Other important application markets for work trucks forecasted to provide good opportunities for sales in 2014 include logging, telecommunications, energy, gas/electric utilities and lease/rental.

In summary, the work truck industry is expected to continue growing through at least 2016. The rate of growth is expected to accelerate the next couple of years as the construction sector continues improving in 2014. In 2015, state/local government expenditures and an improving global economy are expected to create even more opportunities for companies in the work truck industry.

Steve Latin-Kasper is the market data and research director for the National Truck Equipment Association. He joined the NTEA in 1999 and he provides research and analysis on markets and economic indicators as they relate to the work truck and truck equipment industry.