Recession is over, but expectations much different in truck, trailer sales
Feb 1, 2010 12:00 PM, By Rick Weber
ELI Lustgarten said the recession is over and freight will start moving at a more rapid pace, but the “new normal level of demand” will mean truck and trailer sales will be a far cry from the good ol' days.
In “Industry and Financial Trends and Forecasts for the Next Decade,” Lustgarten, senior vice-president of Longbow Securities, said that by 2011, Class 8 truck sales will be in the 175,000 to 225,000 range, but prior level peaks of over 300,000 are unlikely until at least the next emission cycle. He said the estimates are for 135,000 this year, 195,000 in 2011 and 250,000 by 2012.
That “new normal” will be seen in other areas:
The automotive market is unlikely to return quickly to 16 to 17 million car sales that prevailed from 1999-2005 — “perhaps 12 million to 13.5 million is the new norm.”
Housing is unlikely to return quickly to two million starts — “the new norm may be 1.3 to 1.6 million over the next few years, with cautious funding keeping starts below 1 million at least into 2011.”
Construction and mining, engines and turbines, railcars and other heavy equipment face a slow recovery through 2012 to levels likely below 2006 to 2008.
Farm equipment end-market demand growth is dependent on global economic growth, global demand, and weather. Growth could resume as early as 2011.
Electrical markets/alternative energy growth probably resumes after 2010.
Lustgarten said the domestic economic environment is improving, with rising industrial production.
“Total freight ton-miles declined about 2.9% in 2008 and nearly 8% for all of 2009,” he said. “Look for growth of at least 2.5% in 2010 and about 4% in 2011. Truck ton-miles were down about 5.7% in 2008 and about 8% in 2009, and are likely to rise at least 2.5% in 2010 and 5% to 6% in 2011.”
He said truck fleet utilization is undergoing a slow recovery, at 85% to 90%, after bottoming out at 72% in the second quarter of last year. He said substantial excess capacity needs to be absorbed before there is a major upturn in demand, with the timing likely sometime in 2011.
“The growth in freight tonnage will turn positive on a year-over-year basis in the first half of this year,” he said. “The existing stock will handle the freight upturn. There will be demand increases for used trucks and new trucks with 2009 engines, which cost less than new 2010 engines. Truck production in the first quarter will remain strong, reflecting an inventory of pre-2010 engines. The transition from old engines to 2010 engines will likely begin late in the second quarter. The economic recovery, increased truck-capacity utilization, and improving trucker bottom-line will translate into replacement of aging equipment in 2011 and 2012.”
He said the early signposts for the end of the recession have been met: Housing data has begun to flatten and/or improve in terms of new home sales and starts; global purchasing manager indexes have begun to rise; financial risk metrics have begun to normalize; commodity prices have stabilized and/or begun to rise; global equity markets have improved; and financial markets have stabilized.
The economic recovery, he said, is born of a combination of government policy efforts such as: stimulus packages recently passed by the Obama Administration (deficit spending), and the economy's built-in recuperative powers (oil down from $147 peak, with gasoline prices generally in the $2 to $3 range).
“The US uses about 140 billion gallons per year, suggesting the lower fuel prices may provide a huge stimulus,” he said.
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