Negative business sentiment and lower dollar drives fall in truck sales for September quarter

Truck sales are down from the same time last year on the back of worsening business sentiment and a lower New Zealand dollar which had pushed prices higher.

Data from the NZ Transport Agency shows sales of very heavy trucks were down 23% from the same month last year and 18% below their 2014 level.

Road user charges for very heavy vehicles have also fallen nearly 7% since September 2014.

Although the decline in the New Zealand dollar could explain the truck sales data, Infometrics senior economist Benje Patterson says negative business sentiment is also a contributing factor.

“The New Zealand dollar coming off its mid-year highs is beginning to put upward pressure on truck prices but at the same time we have businesses reporting in a number of surveys that they are uncertain about the immediate outlook.”

Negative business sentiment in the rural sector has driven the fall in heavy truck sales, Mr Patterson says.

“That’s particularly the case in trucking for logistical firms that are struggling at the moment or expected to struggle a little, such as firms in regional areas that are exposed to the dairy sector, to mining and also, to an extent, to forestry.”

Given an uncertain outlook, businesses like forestry are delaying decisions about whether to invest in capital such as heavy trucks until the macro environment looked more positive, Mr Patterson says.

“There are expectations that some of the volatility we have seen in forestry prices could continue and put off harvesting activity. Even if actual volumes carted don’t fall a lot, you are going to be less willing to invest in upgrading or expanding your fleet.”

Truck sales overall, however, are at historically high levels because of a more upbeat outlook in other industries which helps to offset the gloom around the dairy sector.

“The construction sector, horticulture and also manufacturing are expanding with the lower dollar.”

Ute sales, on the other hand, have proved resilient, up 2.4% from a year ago, and this is due in part to the vehicles’ broader appeal to a range of consumers in industries currently more optimistic about their business prospects and their more versatile nature.

“It’s not just dairy farmers that buy utes, it’s a variety of contractors; people exposed to the construction sector, sheep and beef farmers and also those in the wine and horticulture sector. Over recent years, utes have become a lot more comfortable and people are using utes for personal reasons as well.”

Despite the recent rally of the dollar from 62c against the US dollar three weeks ago to 66c on Wednesday afternoon, Mr Patterson is picking truck sales will continue to weaken because firms are still adjusting to a dollar which had dropped off mid-year highs.

“It can take a quarter or two for changes in the dollar to flow through into what vehicles are being sold for from the car yards. Until we see signs that the economic outlook has truly brightened, it’s safe to say that [businesses] are going to be more cautious in their spending behaviour.”

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