Page 21 - April-May 2025

TRAILERTALK
U.S. Economy Faces Mixed Signals: Trailer Orders

Up in March; GDP Slips; Tariffs Stir Market Volatility

…Continued from Page 20

early buying of U.S. crude and LNG as tariff negotiations continue. lower spending in both the public and private sectors. Compared to a
Some countries are opting to show good faith in the negotiations by year ago, spending is up 2.8%, which is not adjusted for inflation. The
possibly ordering more U.S. energy products. There is still considerable producer price index for inputs to construction industries rose 1% over
volatility in the market. the same period; lower energy prices have helped keep the overall
index lower, even as other commodity prices have risen.
Recent developments in trade policy and oil production led to a
significant drop in oil prices during the first week of April. On April 2, Private residential investment fell 0.4% in the month on weaker
President Donald J. Trump signed an Executive Order announcing home improvements. Single-family construction was up 0.1%, while
10% tariffs on imports from all countries, with higher tariffs initially multifamily was flat. Mortgage rates fell slightly in March which helped
imposed on some countries. On April 4, China responded by imposing boost new home buying activity. Builders were not swayed by the drop-
34% tariffs on imports from the U.S. Amidst the tariff announcements, in rates; their sentiment about future activity remained pessimistic.
OPEC+ members announced on April 3 that some countries will
start production increases in May that were originally set for July. Larger builders are offering mortgage rate buydowns and price cuts
Following these announcements, the Brent crude oil spot price fell by to lure buyers, while smaller builders are sitting on significant unsold
14% from April 2 to $66 per barrel on April 7. Prices for crude oil and inventories. Around 60% of builders reported price increases or
other commodities are expected to continue experiencing significant announcements of increases in April from their suppliers. More are
volatility as market participants assess the effects of trade policies. expected as copper and lumber are under investigation for tariffs. Those
are expected to be announced later in the year. Lower demand and
Manufacturing Capacity and Supply Chain Pressures increased costs will continue to pressure profit margins. Consolidations,
As companies seek domestic sources for products, U.S. manufacturers notably in the single-family market, are expected. Private nonresidential
are experiencing increased demand. However, capacity utilization construction dropped 0.8% across almost all categories.
remains below the levels that typically signal significant strain. In March
2025, manufacturing capacity utilization was reported at 77.3%, which Manufacturing
is 1.9 percentage points below its long-run average of 79.2%. Manufacturing, the largest category of spending, fell 0.4% on lower
transportation equipment, plastic and rubber and computer and
Despite this, certain sectors are facing challenges. Approximately 11% electronics facilities construction. Computer, electronic and electrical
of manufacturers still report supply constraints, indicating potential manufacturing facilities had been on a tear since the middle of 2021,
bottlenecks in specific industries. Factors such as labor shortages, supported by the infrastructure bills and the CHIPS act, but have
particularly in transportation and warehousing, and rising costs for declined for eight of the last 10 months. Investigations into
imported machinery due to tariffs on Chinese goods are contributing semiconductors and their derivatives are expected to be announced
to these pressures, according to The Supply Chain Report News. later this year. Tariffs on other inputs needed in the construction
and production of these facilities could further hinder those plans.
Automotive Industry: Facing Stockouts and Supply Commercial construction declined 1% on lower retail, restaurant and
Chain Disruptions warehouse construction.
The automotive sector is grappling with ongoing supply chain
disruptions, particularly concerning semiconductors and other critical Data centers, which are recorded under office construction, were flat in
components. These issues, lingering from the pandemic era, continue March but still at record highs. Lack of power sources is a major obstacle
to affect vehicle production timelines and inventory availability. The to ramping up data center construction. Add in rising construction
New York Post reported that recent geopolitical developments have costs and labor shortages, and some large tech firms have already
introduced new challenges. China’s implementation of strict export announced project cancellations.
controls on rare earth elements and magnets — materials critical for
electric vehicle manufacturing — has raised concerns about potential Spending at all levels of government fell 0.2%. Federal spending makes
stockouts and production delays in the U.S. automotive industry. up only about 7% of the total spending. State and local governments
are pulling back due to a shortfall in fiscal 2024 revenues and concerns
Construction over federal funding.
KPMG reported that construction spending fell 0.5% in March on
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