The collapse in heavy duty trucking is getting tougher to blame on difficult YOY comps and is more and more looking like the symptom of a real manufacturing recession in the U.S.
Class 8 orders against collapsed in November, culminating a dismal year that some thought had seen a reprive with October's improved bookings. But new data from FreightWaves shows that the collapse has continued its trend, indicating that the sluggish economy is to blame for lackluster replacement demand.
Orders totaled 17,300 units for the month, which marks the slowest November since 2015 and a 39% collapse from November 2018. The slowdown in orders is prompting layoffs of hundreds of production workers by companies like Daimler Trucks North America, Volvo Trucks North America, Paccar Inc. and Navistar International Corp.
Other names in the Class 8 supply chain are also dealing with the negative effects. For instance, engine manufacturer Cummins Inc. is "laying off 2,000 white-collar employees globally in the first quarter of 2020".
Meanwhile, November used to be a month when fleets would be busy placing orders for the upcoming year. After October's slight tick up in orders, many analysts thought November could follow suit. That didn't happen, and sequentially November's order book was down 21% from October.
Tim DeNoyer, ACT Research vice president and senior analyst said: “The freight market downturn worsened in the past month, and uncertainty surrounding trade and tariffs continue to weigh on truck buyers’ psyches.”
Don Ake, FTR vice president of commercial vehicles commented: "The stalling of freight growth is causing fleets to exercise caution in placing orders for 2020. There will still be plenty of freight to haul, so we expect fleets will continue to be profitable and to replace older equipment. However, there won’t be a need for much additional equipment on the roads.”
“The industry thrives on stability, but we are now on a rocky road,” Ake concluded.
The rolling 12-month average for Class 8 orders is now 180,000 units and the industry backlog has collapsed to less than half of what it was in December 2018.