The most notable data points this month were heavy duty and medium duty retail sales, each up double digits year over year (y/y). Heavy duty cancellations moderated month over month (m/m) and backlog continues to trend lower, but units scheduled for 2H’23 took a meaningful step higher. Coupling the annual seasonally weak period for orders (typically April-August), with a healthy supply chain enabling and elevating production, the Class 8 backlog should be on a downward trajectory until 2024 orderboards open, according to ACT Research’s latest State of the Industry: NA Classes 5-8 report.

Eric Crawford, ACT Research’s Vice President, Senior Analyst, said, “May’s backlog met expectations, down 13,900 units m/m to 189,200, and the backlog-to-build ratio decreased 30 basis points m/m to 6.7 months (7.0 seasonally adjusted).” He continued, “Heavy duty and medium duty production were essentially in line with build plans. May’s Class 8 build rate was a healthy 1,343 units per day, representing the ninth month in the past 12 where build rate exceeded 1,300 units per day.”

Regarding sales, he noted, “Heavy duty retail sales remain robust, up 14 percent y/y at 29,700 units, seasonally adjusted, equivalent to a 357k SAAR. Seasonally adjusted, sales have exceeded 29,000 units in five of the past six months. Classes 5-7 retail sales were up 26 percent y/y at 22,800 units.”

Crawford concluded, “We expect positive momentum to slow in 2H’23 (more so in Q4). Already, one of the critical components of heavy vehicle demand, carrier profitability, is increasingly under pressure. In Q1, the public carriers’ profits declined to levels last seen in early 2020. While some of the decline was seasonal, public TL carrier margins were down 250bps y/y. With contract rates expected to deteriorate into Q4, profit margins should continue to narrow.”