In continuing positive news about the strength of our economy, ACT Research data indicates that Class 8 truck orders just collapsed an astounding 68% for January. The decline is being attributed to a 300,000+ vehicle backlog potentially prompting fleets to halt purchases in the near term.
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.
Stephen Volkmann of Jefferies told Bloomberg that the collapse "should not be a surprise, but is likely to feed the bears". He also guessed that upgrade demand could continue to "support high production through 2020". We'll believe that when we see it.
According to Neil Frohnapple at Buckingham, January is the third month in a row of year over year declines after Q3 of 2018 proved to be better than expectations. Frohnapple told Bloomberg he was "a little surprised" that net orders for January came in at just ~16,000.
Despite this, ACT Research commented: "Regarding Class 8, recall that January 2018 marked the point at which orders went vertical. We view this January’s order softness as having more to do with pulled-forward orders and a very large Class 8 backlog than with the current supply-demand balance. Softening freight growth and strong Class 8 capacity additions suggest that the supply-demand balance will become a story in 2019, but January seems a premature start to that tale."
This news comes on the back of a terrible December for heavy truck orders, which we wrote about last month.
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.
Back in December, BMO analyst Joel Tiss said 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" after December's sharp 43% plunge.
With January's collapse now in the books, "how about now?"