Covid-19 recovery models predict 2021 could be a “transition year” | 2020-05-13


The plunge in freight markets due to the global recession and Covid-19 pandemic may have now stabilized as regions consider an economic “restart,” but a full recovery is unlikely to arrive until 2022 or later, industry groups say.

In the trucking sector, 2021 is being forecast as a “transition year” for the North American commercial vehicle market, as global economies move from Covid-19’s negative impacts into a meaningfully better situation in 2022, according to market analysis firm ACT Research Co.

“Without clear forward visibility on the Covid-19 endgame, the crystal ball is particularly opaque, as the economy begins to reemerge from its medically-induced coma,” Kenny Vieth, ACT’s president and senior analyst, said in the firm’s latest release of its North American Commercial Vehicle Outlook. “History shows that even from the lowest lows, the manufacturers can’t snap their collective fingers and bring production up immediately. Returning to normalized production levels is a process that is hard to rush.”

ACT’s report analyzes information covering forecasts and current market conditions for medium and heavy-duty trucks/tractors, and trailers, the macroeconomies of the US, Canada, and Mexico, publicly-traded carrier information, oil and fuel price impacts, freight and intermodal considerations, and regulatory environment impacts.

One key to the long-term recovery may come from a surprising source, as ACT said that the oft-maligned millennial generation—those born between 1981 and 1996—could be the spark that ignites a return to full consumer spending, and ultimately a rebound in trucking demand. “Coupling an otherwise structurally sound pre-Covid economy, with strong governmental support and rising pent-up demand, there is a case for the economy to rebound into 2021. We believe maturing millennials will be the key to pushing the economy forward as they resume their transition to marriages, kids, and mortgages,” Vieth said.

Analysts looking at the air freight sector also predict a long, slow recovery. A report on global airplane passenger demand released by the International Air Transport Association (IATA) shows that “the damage to air travel from Covid-19 extends into the medium-term, with long-haul / international travel being the most severely impacted.”

“We don’t expect 2019 levels to be exceeded until 2023,” IATA said, using a model assuming a “baseline scenario” where domestic markets re-open in the third quarter, followed by a much slower phased opening of international markets. Passenger air travel makes a significant impact on global freight trends because many airlines store freight in the belly hold of passenger jets. IATA has already warned of an air cargo capacity crunch—particularly for postal services—due to the spate of widely canceled passenger flights.

The air freight recovery could be even slower if lockdowns extend into the third quarter of the year, possibly due to a second wave of coronavirus infection. “Major stimulus from governments combined with liquidity injections by central banks will boost the economic recovery once the pandemic is under control. But rebuilding passenger confidence will take longer,” Alexandre de Juniac, IATA’s director general and CEO, said in the release. “And even then, individual and corporate travelers are likely to carefully manage travel spend and stay closer to home.”

Consumer market analysis firm Nielsen Co. LLC was slightly more optimistic about the return of consumer spending, but said the results will depend on which of three different models applies.

Nielsen studied consumer behavior threshold levels that have provided early signals of spending patterns during the first three months of the coronavirus emergency. Based on that framework, the firm proposed three possible timelines for economic recovery:

  • rebound: an early return to normal living conditions (schools, workplaces, stores, restaurants, etc. re-open) at some point in the third quarter of 2020.
  • reboot: a medium-term scenario that is positioned in the fourth quarter of the year.
  • reinvent: a longer-term view that places the world in a general return to normal living conditions at some point in the first half of 2021.

“Much has been made of comparisons to the 2008 global financial crisis, but this situation doesn’t make for accurate comparisons. The circumstances back then were fundamentally different,” Scott McKenzie, Nielsen’s global intelligence leader, said in a release. “Thousands weren’t dying each day, millions weren’t locked in their homes indefinitely, businesses weren’t ordered to close their doors, kids were still in school. The impact of this will be profound and more far reaching than anything we’ve seen in our lifetimes. The pace of change is also extraordinary.”

According to Nielsen’s analysis, two sets of consumers will emerge as lockdowns continue—those with insulated levels of spending (often those who have maintained employment and remain shielded from day-to-day economic impact) and those who will be restrained in their spending habits due to unemployment, furloughing, or other Covid-19-related challenges.

That polarization of spending is expected to drive new considerations for retailers and brands as they urgently examine the range of products being offered and the pricing dynamics within. “The world is fundamentally recalibrating right now,” McKenzie said. “Consumer habits are changing at pace and understanding those changes, in the context of these scenarios, will be critical as businesses prioritize how they too recalibrate to meet the changed circumstances driven by Covid-19.”


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