For the third straight month, I must admit to doing a double take when going through the monthly Class 8 truck sales stats. There must be a mistake, I thought once again; they can't possibly be that l...
For the third straight month, I must admit to doing a double take when going through the monthly Class 8 truck sales stats. There must be a mistake, I thought once again; they can’t possibly be that low.
The unfortunate reality though is that there was no mistake; the blood bath continues. The first quarter of the year was strong foreshadowing of things to come in this dark year.
Just three months into the year and sales were more than 2,000 off last year’s year-to-date pace, (hardly a banner year in itself); about 3,000 off the five-year YTD average and about 5,000 off the banner year of 2006. Seven months into the year (the latest point for which sales results are available) and Canadian Class 8 truck sales are at their lowest YTD mark over the past decade and almost 10,000 units off the five-year average.
For Class 8 truck manufacturers this will definitely be a lost year and very indicative of the predicament our industry finds itself in, two years into a freight recession. Trucking company executives and owner/operators feel like they’ve had the wind knocked out of them and for good reason. Basically in our industry when it rains, it pours.
Researchers studying the relationship between transportation data and measures of the economy over a 23-year sample period found a distinct relationship between changes in the transportation services sector and economic recessions. The transportation sector typically reaches a peak six months ahead of the economy, while lagging by two months at the trough, which means truckers have to live in recession eight months longer than the rest of the economy.
I have my doubts about the second finding. I believe how quickly truckers come out of recession has a lot to do with inventory levels as the economy starts to recover.
But this time around I don’t think that distinction will make much difference. That’s because theV-shaped recovery that is typical of many past recessions is not likely to materialize, as Peter G. Hall, chief economist with Export Development Canada pointed out in his latest weekly column. True the US economy is expected to outperform the other major world economies, expanding by 2.3% next year, and Canada’s outlook is similar. While that growth is welcomed news, it is well short of a typical rebound and what’s needed to bring prosperity back to our industry. We need growth of at least 3% to fully engage the trucking industry. Unfortunately, the kind of growth trajectory currently envisioned means both the US and Canadian economies would take twice as long to climb back to the pre-collapse level of output than they took to fall, as Hall points out.
The kind of inventory depleting growth necessary to resuscitate our industry will be some time in coming. We may need to hang on till the latter half of 2010 to experience the rebound and until 2011 to return to prosperity.
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