Even as we leave the forecast unchanged this month while witnessing continued positive order activity relative to our forecast, we caution that the freight market fundamentals that inform on the largest single Class 8 market, U.S. for-hire truckload, are still flatlining, as published in the latest release of the North American Commercial Vehicle OUTLOOK.
“Freight markets have not improved as we have trekked through the second half of 2023, with no demand-side relief to date, even as strong Class 8 tractor sales have continued to add to the supply side of the equation,” said Kenny Vieth, ACT Research President and Senior Analyst. “In the short term, one of the things staying our hand from deeper forecast cuts in the face of weak freight fundamentals and falling carrier revenues and profitability has been a solid industry-wide start to ‘order season.’”
Starting around the last trimester of the year, this is the period in which the OEMs open their out-year order books, leading to a period of outsized orders that typically extends into March. This elevated seasonality is one reason why we typically emphasize seasonally adjusted figures in our analysis of month-to-month data.
Vieth concluded, “Looking to 2024, we note that ‘order season’ typically stretches through Q1. While orders have been strong season to date, weak freight fundamentals are expected to limit the duration of this year’s peak order season. Looking forward, we would note that December is typically the strongest month of the year for Class 8 and nearly the strongest for trailers: Seasonality alone suggests a big number to end the year. Q1 is historically weaker for orders than Q4.”
ACT Research believes that a number of “it’s different this time” factors are at work in 2024, and those factors will help support broader Class 8 demand around a fundamentally weak US and Canadian tractor markets. Those factors include ongoing pent-up vocational truck demand, strong tractor demand in Mexico, a healthy domestic LTL market, and issues surrounding supply chain integrity.