USA: Firm but fragmented

From the May 2016 issue.

The US trailer market has seen steady growth since US President Barack Obama was re-elected to a second term in office in 2012. Can it retain that momentum with the next election now on the horizon?

After a long and painful recovery from the burst of the ‘new economy’ bubble, the US trailer market has seen a constant surge of positive news over the last two years or so, with record order activity and production nearing capacity.

The upswing has been so robust that North America’s trailer building community was able to record its second best year ever in 2015 – producing an impressive 302,000 units, almost four times more than in 2009, at the tail end of the Great Recession.

Key to the impressive growth spurt was the United States’ marvellous economic recovery and the unexpected freight demand it caused. The boom came at a time where capacity was still strained after transport businesses had laid off the replacement of older trailers during the recession – particularly in the popular dry van sector. Motivated by the rise in demand, fleets hastily started investing in added trailer capacity again to benefit from the upsurge.

At the same time, new Hour-of-Service regulations decreased productivity by around two per cent, which created additional demand for new trailers to help alleviate the sudden capacity crunch. Adding to the situation was a shortage of truck drivers, which again resulted in carriers buying more trailers to increase the productivity of existing personnel.

Helped by supply chain disruptions due to extreme weather events, such as record snow fall in the winter of 2014, the trailer manufacturing market went from strength to strength until about October 2015, when freight growth began to tumble again and fleets started acting more nervous.

Since then, the consumer sector of the US economy has been holding firm – the job market continues to strengthen, wages are rising and consumer spending is up moderately – but movement on the trailer front has waned notably.

The reason for the sector’s cautiousness lies in the boom itself: Most fleets currently have enough trucks and trailers on hand to haul the available freight, which means most of the new equipment purchases we see at the moment are driven by replacement demand only.

With another Presidential Election looming in November, has the market arrived at a crossroads? Are we seeing the first signs of a large-scale rebalancing between crisis and boom levels? Probably not. What’s safe to say is that the US trailer market is in a very unusual condition in 2016. Usually the segments of the market move in harmony with the diverse US economy and the Class 8, or heavy-duty, truck market. However, this is currently not the case – the overall trailer market has become temporarily decoupled from the truck market, and with it, individual trailer segments are also diverging.

While the Class 8 truck market has shown a significant decline since Q4, 2015 – orders are down 43 per cent so far and production is forecast to drop 26 per cent – trailer demand is holding fairly steady. Production is only expected to fall 7.5 per cent this year, and November 2015 had the third highest trailer orders in history. So, what is happening in the US trailer market that enables it to counteract the current truck market sentiment so strongly?

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