Truck Order Plunge Levels But Cyclical Slump Takes Hold

September 05, 2019 by Jerry Hirsch, @Jerryhirsch

Orders for heavy-duty trucks bounced off their lows last month but are still down dramatically for the year in what some are reading as an indicator of a slowing U.S. economy.

FTR Intelligence estimated that orders for Class 8 trucks in the U.S. and Canada reached 10,400 vehicles in August, a 4 percent gain from the previous month. But that was still down 80 percent year-over-year as shippers and motor carriers pulled back.

ACT Research said the industry booked 10,900 truck orders in August. That was up nearly 6 percent from its estimate for July. But still down dramatically – 79 percent – from the same month a year earlier. ACT noted that August 2018 was the best month on record for truck orders.

INDUSTRY SLUMP

Shippers and motor carriers ordered 108,665 Class 8 trucks so far this year. That is down 69 percent compared with the same period a year earlier, said Kenny Vieth, president of ACT Research.

“The Class 8 market is at a turning point,” said Don Ake, FTR’s vice president of commercial vehicles. “The economy has slowed, and there are enough trucks to handle the available freight growth.”

Truck makers are reducing production rates to replacement demand levels, Ake said.

“From an industry perspective, the U.S. economy is moderating, a number of key economic indicators remain above their long-run averages, but they are trending lower. U.S. GDP is softening and is expected to be around 2 percent for the balance of the year,” Troy Clarke, chief executive of Navistar International Corp. told investors in a conference call Wednesday.

CUTTING PRODUCTION

Clarke said the build rates of new trucks have exceeded orders, causing industry class 8 backlogs to decline 44 percent since peaking last October. Navistar’s backlogs are declining as well, he said.

The owner of the International truck brand is reducing its production level by about 15 percent. That puts its factories at about the level they were running in late 2018.

LATE 2020 REBOUND

Manufacturers should not expect to see much order activity, Ake said. It may be the end of 2020 before the market returns to normal.

“Fleets are in no hurry to start ordering for 2020,” he said.

“There is a tremendous amount of uncertainty in the economy right now due to tariffs and the trade war with China. Businesses are holding back on capital investment and our industry is no exception,” Ake said.

John O'Dell September 5, 2019
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