Heavy Duty Truck Orders Plunge 43% in December, Following November's Double Digit Drop

Orders for heavy duty Class 8 trucks were down 43% in December, according to ACT Research data cited by JP Morgan and Buckingham. According to data, 21,300 units were sold in December. 

Class 8 trucks are one of the more common heavy trucks on the road, used for transport, logistics and occasionally (some dump trucks) for industrial purposes. Typical 18 wheelers on the road are generally all Class 8 vehicles.

An analyst from Buckingham, Neil Frohnapple stated: "Overall, Class 8 orders were at the lower end of our expected range for the month of December as a further slowdown was anticipated given the extended industry lead-times."

December is widely considered to be the highest net order month, but due to Q3 showing strength that normally isn't associated with the seasonally weak quarter this year, some analysts claim they expected the weak Q4 numbers. 

"...we expected the peak-season order period to be relatively weaker," he continued. 

Class 5-7 truck orders - consisting of medium trucks between 16,000 and 33,000 pounds - were down 5% to 21,500 units. 

As we pointed out in early December, the exponential surge in transportation prices as a result of an acute scarcity of truck drivers sent trucking prices soaring last year, and led to a historic spike in Class 8 truck orders as supply had scrambled to keep up with demand. That was, until November. ACT Research reported November preliminary North American Class 8 orders of 27.9K units (26.8K, seasonally adjusted), which was well below most forecasts heading into the release.

When November order numbers came out, we stated that the trucking market was finally starting to cool down:

The total number of orders was down 14.5% from the same month a year ago and off 35.9% from October, when orders reached 43,600. It was the first drop in Class 8 orders this year, falling to the lowest level in 14 months and providing a fresh sign the North American trucking market is cooling down.

According to BMO, one of the most important metrics to monitor will be cancellations. And although gross cancellations have risen relatively precipitously, the cancellation rate as a percentage of trailing 12-month orders remains slightly below 10%. In addition, the cancellation rate as a percent of the backlog reached 3.5% in October 2018, not much higher than the average rate of 2.4%.

As a reminder BMO analyst Joel Tiss said in early December that while "there is no doubt that freight and freight-rate growth have slowed, we do not think that it is time to panic just yet."

What about now?