Truck Orders Plunge to 5-Year Low in November

[kscarbel2]

The Wall Street Journal / December 3, 2015

Trucking companies ordered the fewest number of trucks since 2010 on a seasonally adjusted basis, reflecting a gloomy outlook for freight transportation

Orders for large trucks fell to the lowest level in more than three years in November, according to new reports that suggest U.S. shipping businesses are girding for slower economic growth in the coming year.

Orders for new Class-8 trucks, the biggest trucks commonly seen on highways or at construction sites, totaled 16,600 in November, down nearly 60% from the same month a year ago and 36% fewer than companies ordered in October, ACT Research said in its preliminary report on the month.

The orders for trucks to be delivered in 2016 have fallen sharply since mid-summer amid tepid retail sales growth and warnings from several big retailers that they are overstocked for the holiday sales period.

“A glut of inventory in the broader economy has led to slowing freight and lower freight rates,” ACT Vice President Steve Tam said in a statement. “This in turn has caused truckers to hit the pause button on truck orders.”

ACT said the November total was the lowest that the commercial-vehicle research company has recorded since August 2010 on a seasonally-adjusted basis and the lowest since September 2012 without adjusting for seasonal fluctuations.

A separate report from FTR, a research group that tracks freight transportation, placed net orders for Class 8 trucks at 16,465 in November, which the group said was a “major disappointment” that was significantly below its expectations. The orders reached the lowest level for a November that FTR has recorded since 2009.

The slowdown likely presages deeper cutbacks at truck manufacturers that already have reduced factory work, said Don Ake, FTR vice president for commercial vehicles.

Trucking companies “would appear to have enough new trucks for now,” Mr. Ake said. “The manufacturing sector has sputtered and freight growth has slowed. Orders should stabilize soon, but backlogs will be shrinking, necessitating larger production cuts than were previously expected.”

[kscarbel2]

Big Rig Orders Plummet, Medium-Duty Remains Solid

Today’s Trucking / December 3, 2015

Two new and preliminary reports have been issued when it comes to new big-rig orders and no matter how you slice them they show huge drops while the smaller side of trucking continues at a good pace.

FTR's preliminary data shows November 2015 North American Class 8 truck net orders at 16,475, 59 percent below a year ago and the lowest level since September 2012.

This was the weakest November order activity since 2009 and was a major disappointment, coming in significantly below expectations, according to the freight forecasting firm.

All of the OEMs, except one, experienced unusually low orders for the month. FTR expects orders to be better, but not necessarily good, the next two months. Orders for the last 12 months are now annualized at 300,000 units.

“The November orders are very concerning. People were optimistic when orders held up well during the summer. Now we get into the peak order season and have the lowest orders of the year,” said Don Ake, FTR vice president of commercial vehicles. “The weak orders are the reason for the recent OEM announcements regarding production cutbacks and layoffs. Truck inventories are high and retail sales have stalled.”

He said the reason for the big decline is trucking appears to have enough new rigs for now. That’s because the manufacturing sector has sputtered and freight growth has slowed.

He is forecasting orders should stabilize soon, but backlogs will be shrinking, necessitating larger production cuts than previously expected.

Meantime, a separate report from commercial vehicle industry data provider ACT Research pegs November orders just slightly higher at 16,600, but nearly 60 percent lower than a year ago, the same pattern as last month, when Class 8 orders were off 37 percent year-over-year.

“Unfortunately, little of the decline can be accounted for by seasonality,” said Steve Tam, ACT’s vice president, commercial vehicle sector. “November was the weakest Class 8 net order month since August 2010 on a seasonally adjusted basis and September 2012 on an actual basis. A glut of inventory in the broader economy has led to slowing freight and lower freight rates. This, in turn, has caused truckers to hit the pause button on truck orders.”

Turning to the medium-duty market, ACT said it managed to show solid performance, despite a slight decline in Classes 5-7 during November, with 18,700 unit orders.

“More prevalent direct exposure to facets of the economy other than those that generate freight has allowed demand for medium-duty vehicles to remain more stable,” said Tam. “Despite falling 15 percent month over month, the year-over-year and year-to-date comparisons reveal growth in the mid-single-digit percentage point range.”

.

[kscarbel2]

Falling Class 8 orders: A bad omen for trucking?

Fleet Owner / December 4, 2015

The rapid decline of Class 8 orders in November is one of several signs a sooner-than-expected slump may be ahead for trucking, according to analysts.

With preliminary Class 8 net orders for November dropping below expectations, added alongside broader declines in U.S. manufacturing and non-manufacturing activity, there’s growing concern among analysts that the trucking industry may be poised to hit a rough patch far sooner than expected.

“Based on what we were seeing, we thought freight and truck sales would stay strong through the end of 2015 and into 2016, with a downturn beginning at some point in the second half of 2016,” Kenny Vieth, president & senior analyst with ACT Research Co., told Fleet Owner.

ACT’s previous forecast held that 2017 would be the “horrible year” for trucking, but Vieth said some new factors seem to be speeding up its approach.

“We didn’t fully anticipate the big sustained drop in commodity process – especially the price of oil – and the strong dollar, which means the U.S. is exporting less,” he explained. “Falling commodity prices means freight is drying up and that is freeing up [truck] capacity. Meanwhile, exporting less means manufactures like Caterpillar can’t sell as many machines overseas, so they start producing less and that reduces freight further.”

Don Ake, VP-commercial vehicles for research firm FTR, added that other data metrics – such as weak retail sales and rising inventories – also slowed freight demand.

“We got worried because inventories increased over the last three months at a time when they should have been falling,” he told Fleet Owner. “Meanwhile, retail sales have declined in each of the last four months. They are down 6% at a time when they should be up between 5% and 10% due to the [holiday] season.”

Though FTR predicted in September that truck and trailer sales would start falling in 2016, Ake said the Class 8 order trends through the summer into early fall gave all the indications of a “soft landing,” especially since August’s Class 8 net orders hovered around the 19,000 unit mark.

“We figured, if that’s the bottom of the cycle, that’s not bad; we’ll be OK coming out of summer and experience a soft landing,” Ake said.

But when FTR’s preliminary North American Class 8 truck net orders hit 16,475 units in November, 59% below a year ago and the lowest level since September 2012, Ake characterized it as a “major disappointment.”

“This was the weakest November order activity since 2009, coming in significantly below expectations,” he explained. “All of the OEMs, except one, experienced unusually low orders for the month.”

Ake added that a sub-16,500 unit order rate “doesn’t support our forecast” for 272,000 total North American Class 8 sales for 2016; a forecast already slashed 15% from the firm’s September guidance of 290,000 units.

“There’s significant downside to our forecast now,” he said. “Basically, the industry would appear to have enough new trucks for now.”

In terms of the broader U.S. economy, Lindsey Piegza – chief economist at Stifel Fixed Income – noted some other troubling trends for trucking, with the Institute for Supply Management (ISM) non-manufacturing Index falling from 59.2 to 55.9 in November, marking the lowest reading since May.

Also, she said durable goods orders were revised down from a 3% increase in October to 2.9%, leaving the annual rate downgraded to 0.4%. Capital goods orders excluding aircraft and defense – a proxy for business spending in the GDP [gross domestic product] calculation – also stood unchanged at 1.3% in ISM’s final October report and up 0.4% year-over-year.

“Despite a decline in manufacturing production, the service sector had been able to maintain robust levels of activity, at least until now,” Piegza said in a research update. “At this point, however, the service sector, too, appears to be losing momentum amid lingering barriers to growth such as modest hiring and minimal income gains, pulling service activity down to the weakest reading in six months.”

She stressed that as a more pronounced sector relative to manufacturing accounting for more than a third of the economy, should service activity continue to retreat, “the U.S. economy will have little hope of maintaining the status quo, let alone gain momentum as we head into the New Year.”

FTR’s Ake noted that all of this is going to make December “a critical month” in terms of the future direction of North America Class 8 net orders.

“If we see a number above 25,000 units, we’ll be OK. And that has happened before; in 2013 we got ‘faked out’ by poor November orders of 21,000 and then they shot up to 31,000 that December. It could happen again,” he said.

“But if we get a number under 20,000 units, that’s a problem,” Ake warned.