According to ACT Research’s recently released Transportation Digest, Class 8 retail sales and build are starting the summer at near-record high levels, but evidence supporting a change in direction continues to accumulate. At the same time, the medium duty market was a study of contrasts in April, even as new trailer orders fell to a nearly two-year low.

The report, which combines ACT’s proprietary data analysis across a wide variety of industry sources to paint a comprehensive picture of trends in transportation and commercial vehicle markets, also suggests that the U.S. economy will decelerate from the 2018 tax-cut-boosted vigorous growth of 2.9 percent to a real GDP forecast average of 2.4 percent this year and slightly below 2 percent next year.

“The key message that has dominated our Class 8 outlook remains unchanged: The heavy-duty market is now at the inflection point we have been anticipating, and signs of decline will become apparent as we move through 2019’s second half,” said Kenny Vieth, ACT’s President and Senior Analyst. “Regarding other commercial vehicle segments, we saw medium duty build and sales falter sequentially in April, though longer-term comparisons remained positive, with orders growing month-over-month, but remaining below build rates in the longer term. Trailer volumes continued to be uninspiring in April, with new orders down 6 percent sequentially.”

May Class 8 Truck Cancellations Surprise on the Low Side

According to ACT Research’s (ACT) latest State of the Industry: Classes 5-8 Report, May’s Class 8 metrics generally aligned with expectations, with the lone exception of cancellations, which continued to surprise on the low side. Additional data for the Class 8 market show still-large (but quickly shrinking) backlogs, weak orders, strong build, bigger inventories, and good follow-through on sales.

“Data continue to tell the same stories we have been reporting. First and foremost, the story remains one of current demand strength: The near-term backlog remains full and strong retail sales highlight good follow-through from previously booked orders,” said Kenny Vieth, ACT Research’s President and Senior Analyst. “The second story starts with softening freight metrics, pivots on robust build and sales, and ends at the nominal reality of a 78k Class 8 inventory. In a nutshell, freight growth is stagnating, while Class 8 population growth accelerates, planting the seeds for the end of the current up-cycle in demand.”

Regarding the medium duty markets, Vieth commented, “Medium duty metrics remained in-line with expectations again in May, with most metrics close to their prevailing trends, if displaying some fraying at the edges.”

ACT Research For-Hire Trucking Index: The News Isn’t Good

The latest release of ACT’s For-Hire Trucking Index showed nearly across-the-board declines, with capacity being the lone exception. The Pricing Index fell considerably, to 38.8, in May on a seasonally adjusted basis, the lowest in survey history. from 45.4 in April. The Volume Index dropped further into negative territory, hitting 46.7 (SA), from 49.5 in April. Fleet productivity/utilization slipped to 46.0 in May on a seasonally adjusted basis, down from 49.4 in April, and capacity growth increased to 54.6, from April’s 54.3 reading.

Tim Denoyer, ACT Research’s Vice President and Senior Analyst commented, “May’s Pricing Index was the fourth consecutive negative, after 30 straight months of expansion. This confirms our expectation that the annual bid season is not going well for truckers. We continue to believe rates are under pressure from weak freight volumes and strong capacity growth.”

Regarding the Volume Index, Denoyer said, “Volume in May fell for the sixth time in the past seven months. The softness coincides with several other recent freight metrics, with the drop likely due in part to rapid growth of private fleets and the slowdown in the industrial sector of the economy.”

He added, “The supply-demand balance reading loosened to 42.1, from 45.3 in April. The past seven consecutive readings have shown a deterioration in the supply-demand balance, with May the largest yet.”