Trucking and Machine Tool Repos Decline In Q3

However, other sectors continued to report increased activity in the NQI. Construction repossessions and liquidations rose by 53% during the quarter, and printing equipment repossessions increased by 82%, as compared with the same total last year.

“After two very difficult quarters to start the year, there have been some scattered signs of improvement in the general economy and in some of the most battered verticals of the equipment leasing sector,” said Ed Castagna, president of Nassau Asset Management. “These numbers obviously offer a mixed message and it appears that the economy is showing some signs of life but many sectors have yet to take part in that growth.”

Trucking Repossessions and Liquidations

The 44% drop in truck repossessions may indicate that much of the excess equipment in this sector has been drained from the market, creating some stability in a market that has seen an extraordinary amount of activity in the past few years.

The decline in recent repossessions in the trucking sector is likely due in part to the limited production of new vehicles. FTR Associates, an industry analyst firm, is forecasting a 47% decline in new Class 8 truck production this year.

The NQI data also reflect a mixed bag of news in trucking activity. The August 2009 Freight Transportation Services Index (“TSI”), which measures the month-to-month changes in freight shipments in ton-miles, rose 0.7% in August from its July level, a second consecutive monthly increase, according to the U.S. Department of Transportation.

In fact, the Freight TSI has now avoided a decline for four consecutive months for the first time since 2002, after a stretch of nine of the previous 12 months in which the index declined. However, the Freight TSI marked its lowest figure for August since August 1997 with a 10.9% decline from August 2008, the largest month-to-month decline in August in the 20 years for which the TSI is calculated.

Construction Repos Still on the Rise

The current 53% rise in construction activity shows the continued problems faced by the home-building industry. The Commerce Department recently announced that construction of new homes rose slightly, by 0.5% in September, with an increase in single-family construction leading the way. But applications for building permits fell by 1.2%, the largest amount in five months, raising doubts about the state of future housing activity.

On the other hand, the Architecture Billings Index, conducted by the American Institute of Architects to track increases or declines in workloads, rose 1.4 points to 43.1 in September, indicating improving business conditions. Additionally, the AIA's new project inquiries index reached its highest level since September 2007 of 59.1, up from 55.2 in August.

Machine Tool Repos Decreased

Repossessions of machine tool equipment in Q3 2009 dropped by 55% as compared with totals for the same quarter in 2008, offering some hope for a sector that may best reflect the true economic condition of the country.

External data support the perception of some form of turnaround in this sector. According to recent monthly reports by AMT (The Association for Manufacturing Technology) and AMTDA (the American Machine Tool Distributors' Association), U.S. manufacturing technology consumption has risen in three of the last four months. The Institute for Supply Management (“ISM”) reported in its August 2009 Manufacturing ISM Report on Business that the U.S. manufacturing sector finally achieved growth in August, for the first time in 18 months.

However, the AMT/AMTDA consumption rate for August dropped by almost 15% as compared with July and was down 63% from the total reported for August 2008. The year-to-date total is down 67.7% compared with 2008.

Other Equipment

Printing equipment repossessions continue to rise because that sector faces considerable pressure from the problems faced by many other business markets. Until those areas show improvement, the printing market will remain under duress. Recent analyst reports on companies such as Xerox, Canon, and Oce state they are operating in weak markets that will remain in that situation for some time to come.

Data in the NQI showed repossessions of medical equipment in 2009 declined by 32% from the same quarter of 2008. The recent decline in activity appears to reflect the fact that lenders are being more flexible with their terms and have been conservative in their approach to proceeding with repossession.

The third-quarter results of Nassau Asset Management's NasTrac Quarterly Index (“NQI”) show a decline in trucking and machine tool repossessions, as compared with the same quarter last year, while construction and printing equipment repos continued to rise.

According to the NasTrac survey results, repossessions and liquidations of trucking equipment and machine tools in the third quarter of 2009 declined as compared with similar figures from 2008. The figures, culled from the company's activity reports for both repossessions and orderly liquidations, also indicated a rise in repossessions for both construction and printing equipment, offering mixed news on the health of the American economy as it emerges from the recent recession.

Trucking repossessions, which have undergone a steady and continuous increase over the past year and a half, dropped by 44% in the latest NQI. Machine tool repossessions processed by Nassau declined by 55% in Q3 2009, as compared with the same period in 2008.

However, other sectors continued to report increased activity in the NQI. Construction repossessions and liquidations rose by 53% during the quarter, and printing equipment repossessions increased by 82%, as compared with the same total last year.

“After two very difficult quarters to start the year, there have been some scattered signs of improvement in the general economy and in some of the most battered verticals of the equipment leasing sector,” said Ed Castagna, president of Nassau Asset Management. “These numbers obviously offer a mixed message and it appears that the economy is showing some signs of life but many sectors have yet to take part in that growth.”

Trucking Repossessions and Liquidations

The 44% drop in truck repossessions may indicate that much of the excess equipment in this sector has been drained from the market, creating some stability in a market that has seen an extraordinary amount of activity in the past few years.

The decline in recent repossessions in the trucking sector is likely due in part to the limited production of new vehicles. FTR Associates, an industry analyst firm, is forecasting a 47% decline in new Class 8 truck production this year.

The NQI data also reflect a mixed bag of news in trucking activity. The August 2009 Freight Transportation Services Index (“TSI”), which measures the month-to-month changes in freight shipments in ton-miles, rose 0.7% in August from its July level, a second consecutive monthly increase, according to the U.S. Department of Transportation.

In fact, the Freight TSI has now avoided a decline for four consecutive months for the first time since 2002, after a stretch of nine of the previous 12 months in which the index declined. However, the Freight TSI marked its lowest figure for August since August 1997 with a 10.9% decline from August 2008, the largest month-to-month decline in August in the 20 years for which the TSI is calculated.

Construction Repos Still on the Rise

The current 53% rise in construction activity shows the continued problems faced by the home-building industry. The Commerce Department recently announced that construction of new homes rose slightly, by 0.5% in September, with an increase in single-family construction leading the way. But applications for building permits fell by 1.2%, the largest amount in five months, raising doubts about the state of future housing activity.

On the other hand, the Architecture Billings Index, conducted by the American Institute of Architects to track increases or declines in workloads, rose 1.4 points to 43.1 in September, indicating improving business conditions. Additionally, the AIA's new project inquiries index reached its highest level since September 2007 of 59.1, up from 55.2 in August.

Machine Tool Repos Decreased

Repossessions of machine tool equipment in Q3 2009 dropped by 55% as compared with totals for the same quarter in 2008, offering some hope for a sector that may best reflect the true economic condition of the country.

External data support the perception of some form of turnaround in this sector. According to recent monthly reports by AMT (The Association for Manufacturing Technology) and AMTDA (the American Machine Tool Distributors' Association), U.S. manufacturing technology consumption has risen in three of the last four months. The Institute for Supply Management (“ISM”) reported in its August 2009 Manufacturing ISM Report on Business that the U.S. manufacturing sector finally achieved growth in August, for the first time in 18 months.

However, the AMT/AMTDA consumption rate for August dropped by almost 15% as compared with July and was down 63% from the total reported for August 2008. The year-to-date total is down 67.7% compared with 2008.

Other Equipment

Printing equipment repossessions continue to rise because that sector faces considerable pressure from the problems faced by many other business markets. Until those areas show improvement, the printing market will remain under duress. Recent analyst reports on companies such as Xerox, Canon, and Oce state they are operating in weak markets that will remain in that situation for some time to come.

Data in the NQI showed repossessions of medical equipment in 2009 declined by 32% from the same quarter of 2008. The recent decline in activity appears to reflect the fact that lenders are being more flexible with their terms and have been conservative in their approach to proceeding with repossession.