January Class 6-8 sales of 22,705 units were the lowest January in four years.
January is a seasonally weak month for truck sales. After seasonal adjustment, sales have been steady at about 26,000 a month since September. The deep slowdown is largely confined to the United States. There is no similar slowdown in Canada, Mexico or Europe.
Factory sales and imports from Canada and Mexico have held under 20,000 a month since September, so 6,000-7,000 trucks are being absorbed from the surplus inventory each month. Inventories of new tractors will be back in balance long before the overhang of parked and underutilized units ends.
Truck demand is expected to begin increasing slowly by the end of winter, with enough new demand by mid-year to raise truck production and retail sales in the second half of 2001. Capital and operating costs are now falling again. Interest rates have declined more than one percentage point, with a further decline up to one percentage point expected by the summer.
For small fleets and owner-operators, credit standards will not begin to be loosened until at least mid-year. Diesel fuel prices have dropped about 10 cents per gallon, but further declines in 2001 appear unlikely.
Lower costs lead to added capital purchases only if business volume requires more capacity. After dropping slightly last fall, freight volume is anticipated to be rising again by the end of winter. The Heavy Duty Trucking Freight Index forecasts that volume will be 4.2 percent higher at the end of the year.
This is critically linked to the course of the current slowdown in the overall economy. Most signs now point to a quick "V"-shaped slowdown-recovery period. March might be the bottom.
GDP growth will rebound to the 3 percent to 4 percent range in the second half of the year. Quick response to excess inventories by the Federal Reserve Board, manufacturers, importers and retailers could keep this economic slowdown much shorter than past episodes.