ACT Research: Inflation and Rising Rates Dampen Forecasts

According to ACT Research’s latest release of the North American Commercial Vehicle OUTLOOK, forecasts this month are slightly lower than September due to stubborn inflation and the Fed’s continued firm action toward bringing it down to its 2% target.

“We note that we are already starting to see some commentary arguing the Federal Reserve is moving monetary policy too fast, thereby increasing the likelihood of an overshoot that leads to a recession.” Kenny Vieth, president and senior analyst at ACT Research, said. “The data suggest the Fed has little choice. It is our view that the Fed will continue on its course of tighter monetary policy, as still deep-pocketed consumers and businesses drive demand for labor in structurally constrained labor markets. Employment metrics suggest there is little room to rein in wage inflation outside of aggressive monetary policy actions that reduce demand. Job growth is moderating, but September’s job gains were still 38% above the 2011-2019 average of 190k jobs per month.”

“The critical factor in forecasting 2023 is the answer to the question, ‘when do lower freight rates compress carrier profits sufficiently to kill the cycle?’ Our current thinking is that the negatives begin weighing on demand by the second half of 2023.” Vieth said. “However with prebuying ahead of the California Air Resources Board’s expensive clean truck mandate late next year and still healthy carrier margins early in the year, a case can be made that demand strength will be sustained through 2023. Higher volumes in 2023 would come at the expense of vehicle demand in 2024.”

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