ACT: Inflation, Supply Chain Disruption and Potential Recession Remain Themes



Surging inflation, the Fed hiking interest rates into a potential recession and supply chain disruptions remain overarching themes in the commercial vehicle market, according to ACT Research’s latest State of the Industry: NA Classes 5-8 report.

“The prospect of a U.S. recession has grown materially since Russia’s invasion of Ukraine, and as of the July issue of ACT’s NA OUTLOOK report, a 2023 recession is now the base-case expectation, with freight volumes beginning to contract in Q3/22.” Kenny Vieth, president and senior analyst at ACT Research, said. “Meanwhile, supply chain disruptions remain a wild card, as the war in Ukraine continues and China announced fresh lockdowns following another surge in COVID infections.

“The takeaway for us is that interest rate hikes to date have not yet slowed inflation sufficiently, meaning the Fed is likely to remain aggressive, risking a deeper recession in 2023 as they work to rein in inflation. The prevailing theme cycle-to-date has been one of whack-a-mole, i.e., as shortages of one component are alleviated, another issue arises. Russia and China issues aside, the past two months have seen modest OEM beats of its medium-duty and heavy-duty build plans, suggesting that availability and, possibly, visibility, is improving.

“Forward-looking data were largely aligned with expectations in June, while concurrent and trailing indicators were modestly above expectations as North America’s commercial vehicle markets continue to embody a balancing act between demand-driven potential and supply-side realism. For context, we saw Class 8 orders rise 16% sequentially in June, cancellations fall to a 12-year low, build rise to its highest level this cycle and heavy-duty retail sales jump to its best result of the year.”


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