Commercial truck sales, generally regarded as a leading indicator of economic vitality, are booming nationally, suggesting better days ahead. But so far, Connecticut isn’t feeling the joy.
An unemployment rate that remains higher than the national average and the nearly non-existent housing and construction market have kept a damper on local truck dealer’s business.
“It’s looking better than it has, but it’s certainly much farther behind what it could be,” said Jon Kirkpatrick, a sales representative with Peterbilt of Connecticut, with locations in Berlin and North Haven. “The numbers you see nationally are skewed by the mega-fleets.”
According to ACT Research, which tracks national commercial vehicle orders, March orders for all trucks were up 159 percent over March 2010. March sales for Class 4-7 medium-duty trucks, generally the types of vehicles most likely purchased by local companies, totaled 30,935 vehicles in the first quarter of this year, more than triple the 9,708 vehicles sold in the first quarter of 2010, according to WardsAuto.com.
That good news, though, has not filtered down to the local economy. Tracking commercial vehicle sales on a state-by-state basis is virtually impossible since larger fleets often purchase directly from truck makers themselves. But commercial vehicle registrations is one indication of the overall health of the market.
According to the Dept. of Motor Vehicles, commercial truck registrations in Connecticut have declined since May 2010 when there were 71,126 “active registrations” in the state, a spokesperson said. As of April of this year, that number had dropped to 69,704.
Kirkpatrick said a combination of factors is holding back sales. During the height of the recession, business for commercial truck dealers dropped to record lows. Things slowly began improving despite sharp rises in vehicle price tags in 2010 linked to the addition of diesel exhaust emissions control devices mandated by the Environmental Protection Agency. There was a similar price increase in 2007. As a result, a typical home heating oil truck that sold for $90,000 in 2004 is now going for as much as $119,000, Kirkpatrick said.
Two areas particularly hard-hit have been the owner-operator and dump truck segments, Kirkpatrick said. “The dump truck business is still dead,” he pointed out. “The owner-operator business is gone.”
The trucking industry, according to many economists, is among the first to feel the effects of an economic slowdown, and also among the first to emerge healthy. But in Connecticut, truck sales are bucking the national trend.
“Right now, I’m seeing a very strong reluctance to make any purchases,” said Allen Baumert, sales manager of Nutmeg International Trucks, with locations in Hartford, North Haven, and Franklin. “It might be (as bad as) it was two years ago.”
That’s in keeping with other indicators.
“The economy is in recovery,” said Peter Goia, vice president and economist with the Connecticut Business & Industry Association. He labeled Connecticut’s rebound “weak.” “It’s nowhere near the national recovery right now.”
Goia pointed out that while the national economy gained jobs in March, Connecticut lost 6,000, and unemployment in the state is still at 9.1 percent, above the national average of 8.8.
“Housing construction is extraordinarily weak,” he added, with just 222 new housing permits taken out in March, down from a normal range of 900-1,000. “Yes, we are improving compared to 2008, 2009, and slightly better than 2010, but it’s still pretty weak.”
And while retail sales are beginning to improve, that has not translated into confidence for local trucking companies that business is improving enough to justify paying the large price tag for a new truck.
“Many of these customers are repairing older equipment until their revenues increase,” said Baumert.
One big concern that has been holding back purchases, said Mike Reilly, president of the Motor Transport Association of Connecticut, the state’s trade association representing trucking interests, is uncertainty over the possible repeal of the property tax exemption on commercial vehicles weighing over 56,000-pounds gross vehicle weight.
The law, which exempted property tax for five years on vehicles purchased in Connecticut, was put in place in the 1990s to spur the purchase of commercial vehicles in the state. A proposal in the legislature’s finance committee would repeal that exemption, and as long as that was unsettled, Reilly said, buyers were hesitant. “That’s frozen the market,” Reilly said.
According to Baumert, customer anxiety over the general state of Connecticut’s economy as well as uncertainty with the state budget and potential tax increases is causing many to rethink purchasing.
“We’ve seen in the last 60 days a large decline in interest in purchasing,” he said. “Once the budget is set and customers know what their taxes are going to be,” there might be an uptick.
With the budget signed, truck dealers can start thinking about better days. “Everybody’s hoping that the national trends will swing to Connecticut, but nobody’s swinging from chandeliers yet,” Reilly said.
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