Page 9 - Market Outlook Q3 2025

Q3, 2025
9

North American Trailer

Economic Overview

have grown at the same rate for the past 20 years, although the growth which has declined this year, that makes sense. From a trailer industry
of trailer production has been much more volatile. perspective, that is problematic, because intermodal units are also more
highly correlated with trailer production than the number of carloads.
The Freight Index is still trending down. It is well below trend as of
August. In fact, it hasn’t tracked that far below trend since first-quarter Figure 13
2009, near the trough of the last recession. That is likely the case this
time as well. Unfortunately, it may stay below trend through the fourth The intermodal unit data series has been a good long lead-time
quarter, and possibly through the first half of 2026 due to trade policy indicator of turns in the trailer production cycle. It provided two years of
and regulatory uncertainty. However, the primary difference between lead-time at the most recent peak and trough and has possibly already
now and 2009 is that the economy was literally in recession then — that called the peak of the next trailer production cyclical expansion, which
has just begun. If it provides two years of lead-time again, the current
trailer production expansion will peak early in 2027. However, that is
unlikely.
What is more likely is that current trade policy (swiftly changing tariffs)
has led to a false cyclical peak in intermodal units. There is no way for

is not the case now.

Figure 11
In Figure 11, we can see that trailer production started growing on a
month-to-month basis in February. The change in trend did not last
long though. From April through August production flattened at an in- us to know whether this is correct until after the fact, but it is hard to
dex level of 75. In Figure 12, which shows the same data series in terms argue away from. Intermodal units will likely continue falling at least
of annual percent change, it remains clear that trailer production is through the first half of 2026 since trade policy is unlikely to change
trending up. Current expectations call for freight and trailer production until November of next year at the earliest.
Figure 14

to continue growing slowly through 2026. On a month-to-month basis,
that slow growth will likely remain a bit choppy.

Figure 12
The data in Figure 15 support the above discussion of the likely trend
Intermodal units (containers carried on train-car and trailer chassis) in intermodal units. Truck border crossings from Canada and Mexico
and carloads (train-cars primarily carrying bulk commodities) have started falling (historically unusual) in the first quarter of 2025. Those
been moving in opposite directions since the first quarter. Given that two countries are our largest trading partners, and the decline in trade
intermodal units are more highly correlated with international trade, with them is likely to cause U.S. economic growth to slow.

Figure 15
Trailer Industry Forecast
In Figures 16 and 17, we can see that the long-distance trucking and
courier industry cycles both reached their troughs near the beginning
of 2024 and provided 12 months of lead time relative to the trough
Continued on Page 10