There has been a positive alignment of various factors that drive truck demand, according to Kenny Vieth, president and senior analyst for ACT Research.

Speaking at the 53rd ACT Research Seminar, Vieth said that in the last several quarters, publically traded truckload carriers were seeing 6% to 6.5% profit levels compared to the 4% to 4.5% they saw between 2010 and 2013.

This, coupled with the fact that fleets are operating older trucks, new vehicles are getting better fuel economy, the driver shortage and credit availability, has led to increased truck purchases this year. Vieth says that when fleets are making money they prefer to buy trucks rather than pay taxes on the money they make.

However, there seems to be some softening in the market, Vieth says. The rollback of the two overnight provisions of 34-hour reset in hours of service and the fact that there have been misses the past two months in the OEM build plan are signs that truck sales may be slowing down. In fact, production seemed to outstrip orders in September, although final numbers are not yet available.

As a result of these factors, ACT has lowered its 2015 Class 8 forecast to 328,000, and Vieth says that number could go as low as 322,000 depending on what September final numbers show.

But perhaps the bigger story is what is happening with dealer inventory. Inventory to retail sales is up year-over-year to 2.5 months. That increase means there are 8,500 additional units in inventory compared to last year. As Vieth described it, “dealers are sitting on a boatload of inventory.”

During an informal discussion before the seminar one dealer confirmed that “dealers have loaded up on inventory” and that although “we had a great first six months there is not as much quoting going on for multiple unit deals.” He added, however, that the dealership is still getting “floor traffic” so there is still interest in trucks.

Vieth says he sees the sees the supply-demand equilibrium being neutral by the end of 2015. In addition, the fact that new trucks are being purchased at a rate that exceeds what would be expected given the rate of economic growth could negatively impact freight rate growth.

He believes 2016 will be another good year in terms of fleet profitability but expects some softening in the market by the second half. The strong U.S. dollar and weak world economy will keep overall growth spotty, he believes. His forecast for 2016 North American production is 296,000 units.

Vieth says the full implications of the proposed Greenhouse Gas Phase 2 Standards are not yet apparent, but the cost of the technology will influence whether or not there is a significant pre-buy prior to the standards taking affect. For example if the cost of compliance resulted in an increase price of $20,000 — EPA is predicting it will be $12,000 — there would be “significant market disruption,” Vieth said and likely an uptick in buying in 2019 and 2020.