FARMINGTON HILLS, MI — Leading U.S. economists at the National Truck Equipment Association’s (NTEA) Economic Outlook Conference agreed that 2006 will be a year of continued growth for the commercial truck and transportation equipment industry. Four top analysts shared economic forecasts with nearly 100 industry professionals in Dearborn, MI.
According to Tim O’Neill, principal of O’Neill Strategic Economics in Toronto, U.S. economic growth has been healthy despite rising oil prices, and inflation remains well contained. O’Neill predicated the Federal Reserve will continue to raise rates and that the spread between long-term and short-term rates will remain relatively stable. However, he cautioned on economic risks in the form of a U.S. trade imbalance, high energy costs and a collapse in house prices.
Martin Labbe, president and CEO of Martin Labbe Associates in Ormond Beach, FL, predicted sales growth for Classes 1-8 in 2006, but expressed concern regarding heavy-duty truck sales in 2007. Due to impending emissions regulations and concerns about new engine technology, he said there is likely to be a pre-buy situation in 2006 that may result in a decline in heavy-duty sales and production in 2007.
Eli Lustgarten, senior vice president of Longbow Research in Cleveland, OH, and principal of ESL Consultants in St. Louis, MO, forecasted strong industry growth through 2010, but concurred with Labbe that 2007 may bring decreased heavy-duty truck sales.
Lustgarten also noted that the commercial truck and transportation equipment industry’s respite from high steel and other commodity prices may be at an end, as August steel prices were increased from second quarter levels.
Among other topics, Lustgarten also discussed signs of a sustained recovery in the manufacturing sector.
“In September 2004, the concern was whether manufacturing was finally beginning to recover,” he said. “Today, the manufacturing data is consistent with our belief that 2004 was the first year of at least a three-year upturn for this sector, lasting through at least 2006.”
Steve Latin-Kasper, market data and research director for the NTEA in Farmington Hills, MI, estimated 20 percent growth in truck equipment sales in 2005, and additional growth of 5 to 10 percent in 2006. He also referenced the close cyclical relationship that has existed between the commercial truck and transportation equipment industry and interest rates for the last five business cycles. Based on this link, Latin-Kasper said interest rates that have been rising since July 2004 indicate a likely decrease in business truck production in late 2006 or 2007.
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