In discussing findings from the latest release of ACT Research’s North American Commercial Vehicle Outlook, Kenny Vieth, president and senior analyst for ACT Research, said, “There is a strong case to be made for continued strength in freight activity into the end of the year and beyond.”

According to the outlook, the following two charts can be used to show the strength of both freight demand and heavy vehicle demand.

“The total business inventory-to-sales ratio bounced off the bottom in May but remained well below the recent range in this era of multiple sales channels, showing that at May’s sales rate, it would take $150 billion of inventory accumulation to bring the ratio to the low end of its recent range and suggesting a good pipeline for freight,” Vieth said. “Add to that the steamships that are piling up on both coasts and there is a strong case to be made for continued strength in freight activity into the end of the year and beyond. It is often said that freight is not a backlog business. Low inventories and stacked-up ports make this period an exception to that rule.”

“The second chart shows the just-completed accounting of the publicly traded truckload carriers’ performance in Q2/21,” Vieth said. “As illustrated, the entire TL group saw profits rise to record levels in the second stanza to 7.34%, 10 bps above the previous record quarter for profitability set in Q4/18 and 138 bps higher than the comparable quarters in the 2018 run-up,” Vieth said. “With the freight pipeline filled, the commercial vehicle industry unable to accelerate vehicle production and seasonal considerations, fleet profitability should continue rising into year’s end and start 2022 on a very strong footing. While our first chart serves as a proxy for strong freight demand, the relationship between carrier profits and heavy vehicle demand are both obvious and irrefutable. The questions that remain are the speed at which fleets overcome driver capacity constraints and the speed at which vehicle production rises once current supply chain constraints are overcome.”

When asked about commercial vehicle demand and supply chain challenges, Vieth said, “Medium-duty, heavy-duty and trailer backlogs are essentially filled through 2021 and well into 2022, with BL/BU ratios well above traditional ranges and inventories below traditional thresholds. As has been the case since the start of the year, supply chain constraints, rather than fleet/consumer demand, are the primary driver of how many vehicles will be produced in 2021.”