ACT Research: Despite Likely Recession, Factors Continue to Dull a Sharper Downturn

According to ACT Research’s latest North American Commercial Vehicle OUTLOOK, forecasts this month remain unchanged from last month. Demand remains healthy, production remains constrained by supply chain disruptions and tight labor markets, and freight rates and volumes managed to squeeze out small improvements.

“We’re hardly at the ‘edge of the cliff’ stage when it comes to our outlook, but as the old investing maxim goes, don’t fight the Fed.” Kenny Vieth, president and senior analyst at ACT Research, said. “We believe wage inflation needs to moderate before the Fed can begin turning away from tighter monetary policy. As long as the jobs report remains strong, wage inflation may prove stubbornly persistent, which could in turn lead to more-aggressive-for-longer rate hikes.

“Encouragingly, there are signs the labor market is beginning to cool. Examining the monthly employment and wage data published by the BLS, job additions have been gradually trending lower through 2022 and the pace of wage appreciation is easing. That said, we suspect monthly job additions need to fall further to enable more lasting moderation in wage and core inflation.

“We continue to see at least three factors mitigating a more severe downturn. Carrier profits and profitability were at record levels in 2021, and contract freight rates are still expected to rise by high single digits this year. Vehicle demand remains healthy, if moderating from here, with pent-up demand and low inventories expected to help mitigate the depth of the downturn. Finally, some prebuy activity is anticipated prior to the implementation of CARB’s Clean Truck mandate, entering a queue already filled with pent-up demand. States representing about 10% of industry demand will be adopting CARB mandates in both 2024 and 2025.”

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