NTEA Senior Economist Predicts ‘Return to Normal’ by 2022

COVID-19 tore the fabric of society apart last year, but numerous economic signs, from GDP to heavy tractor volumes, indicate that it is slowly being stitched up, according to data provided in mid’s update. -Year of the NTEA Work Truck Industry.

“The forecast here for GDP is very good,” said Steve Latin-Kasper, senior director of market data and research for NTEA, citing data from the Bureau of Economic Analysis and the National Association’s forecast panel. of Business Economics (NABE). “For the remainder of this year, we expect GDP to grow 8.5%, which would have been a record had it not been for the burst growth of the pandemic in the third quarter of 2020 reaching more than 30%. “

The NABE outlook shows that the GDP increases from 3.8% to 6.7% from December 2020 to June 2021.

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He continued that a “return to normal”, or levels of GDP growth rate of around 2.5% – similar to 2017 to 2019 – will occur by the second half of 2022. “A good one. amount of volatility “will remain until then, Latin-Kasper mentioned. While much of the manufacturing sector has already returned to shape or improved to pre-pandemic levels, the entertainment and tourism industries have yet to find their place.

Although more than half of the U.S. population over the age of 12 has been vaccinated, according to the Centers for Disease Control and Prevention, the emergence of a supposedly more transmissible “delta variant” of the coronavirus and the reimposed mask mandates Los Angeles County, shows the specter of COVID-19 continues to haunt the country, scaring potential consumers away from typical summer expenses.

Labor is also expected to rebound by the first quarter of 2022, Latin-Kasper noted. Initial claims peaked at 21 million initial jobless claims in April 2020 and are now around 500,000 per month, dropping to 250,000 / month by the end of the year. The unemployment rate in June was 5.6%.

“The recession is over, but the impact of the recession is not over,” Latin-Kasper noted.

In the work truck industry in particular, total revenue from shipments, which includes tractors, trailers, buses, bodies and related equipment, increased from $ 156 billion in 2019 to $ 126 billion. in 2020, down 20%, and climbed back to around $ 141. billion in 2021. This too is expected to increase in the first half of 2022.

“We were heading into recession as a percentage of annual change at the end of 2020,” Latin-Kasper said. “The pandemic only accelerated the whole thing and caused it to fall faster and further than it otherwise would have. “

Class 2-7 box-off chassis shipments had started to decline in year-over-year growth even before COVID-19 began to spread in the United States, dropping 23% in Q2 2020 before a strong ascent. NTEA’s most recent estimate shows a 10% year-over-year increase, roughly the same as this time of year in 2017 and 2019.

The shift to last mile delivery spurred by the explosion of e-commerce has pushed lighter trucks and vans to the front of the pack.

“Class 2 and 3 sales are going faster than any other weight class in the industry right now and have been since the first half of 2021,” said Latin-Kasper, noting that Class 6 is keeping pace.

NTEA has forecast sales of classes 2 to 5, which are up 5% year-on-year and could climb to 15% by the end of the year.

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Supply chain challenges, however, limited the potential for growth.

“The shipments are struggling to keep up at the moment,” the economist said. “Supply chain issues are going to make it difficult to catch up with shipments for a while.

Class 6-8 sales and shipments fell more rapidly in 2020 and are gradually resuming growth.

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Regarding sales of commercial vans, Latin-Kasper said: “Sales have rebounded strongly from a low of around 13,000 units to a current high of around 27,000.”

Inventory and supply issues will keep things “choppy” until the end of the year as OEMs grapple with supply challenges, Latin-Kasper added.

Good news for transportation comes from the increase in OPEC oil production, which is expected to drop $ 10 from the current price of $ 75 / bbl by the end of the year, according to a forecast from the NABE.

“We could see the price of diesel drop in the very near term,” Latin-Kapser said, although this is not immediate as consumer demand will keep fuel prices high as former remote workers start over. to commute. “Expect to see fuel prices likely drop at some point in the third quarter, certainly in the fourth quarter, unless something very strange happens and OPEC decides to cut supply again. “

If a federal infrastructure spending is ever passed, it would also be a boon to the commercial truck industry, Latin-Kasper noted.

The biggest problem that could leave the air out of these projections is inflation.

“Some economists expect inflation to exceed 3% – this could end up being one of the defining issues of what impacts our growth potential going forward,” Latin-Kasper said. “Inflation is a scam right now, but most economists think it’s temporary.”

This story originally appeared on Fleet owner.
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