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Why We Continue to Expect a Recession and Lower 2023 Class 8 Build

| December 30, 2022

ACT Research says “We are already seeing the slowest y/y growth in the money supply (M2) since 1995, and that metric will turn negative in coming months.”

In the release of its Commercial Vehicle Dealer Digest, ACT Research reported that the longer inflation remains elevated, the more aggressively the Fed will respond with higher interest rates. This increases the chances of a sharper decline in economic activity, and 1) results in fewer commercial vehicles (CVs) required to facilitate this subdued activity and 2) will likely exacerbate downward pressure on spot and contract rates, adversely impacting carrier profitability.

According to Kenny Vieth, ACT’s President and Senior Analyst, “We are already seeing the slowest y/y growth in the money supply (M2) since 1995, and that metric will turn negative in coming months.” He continued,Recent economic data are inconclusive: the labor market continues to add jobs at a pace that implies too-hot wage inflation pressures, but the most recent core personal consumption expenditures (PCE) reading indicates inflation may be moderating.”

Vieth concluded, “It is our view the Fed will continue on its course of tighter monetary policy until the data signal unambiguously that inflation is moderating, as still deep-pocketed consumers and businesses drive demand for labor in structurally constrained markets.”

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