ACT Research’s preliminary estimate for April 2019 net trailer orders is 14,500 units, the lowest since July 2017. It is down 7 percent from March and 38 percent below a year ago.
“Order volume was soft in April for the second straight month. Several factors appear to be in play. OEMs continue to be reticent to fully open 2020 orderboards. This is evident in our measurement of the extent of the industry’s backlog, which has remained in the November or December timeframe throughout the first four months of 2019,” said Frank Maly, ACT’s Director of CV Transportation Analysis and Research.
He added “While we hear comments of some fleets anxiously awaiting the chance to snap up 2020 build slots, some also appear to be evaluating their existing commitments. Cancellations in April were the highest since August 2016 on both a unit and percent of backlog basis, and have remained elevated since December. That resulted in an interesting dichotomy in April orders; while new orders were actually up versus March, cancellations were significant enough to pull the net order number into the red month-over-month.”
While down slightly from March, production continues at a brisk pace, although material/component availability and staffing continue to challenge OEMs. Seasonal patterns actually called for a slight increase for April production, so that small sequential decline likely confirms the impact of the aforementioned headwinds. Additionally, our discussions indicate that red-tagged units continue to challenge OEM production efficiency.
ACT Research For-Hire Trucking Index
The latest release of ACT’s For-Hire Trucking Index showed an improvement in volume, although the measure remains in negative territory at 49.5 seasonally adjusted. The bigger story this month, however, was the Pricing Index, which fell considerably to 45.4, from 49.4 seasonally adjusted in March. The supply-demand balance was loose for the sixth consecutive month, and the reading dropped to 45.3 in April, from 46.7 in March.
Kenny Vieth, ACT Research’s President and Senior Analyst, said, “This was the third straight Pricing Index negative after 30 consecutive months of expansion, and after an extraordinary cycle with a record 64.8 average for full-year 2018, rates are under pressure from weak freight volumes and strong capacity growth.”
“Volume in April fell for the fifth time in the past six months, and the softness coincides with several other recent freight metrics we’ve been reporting in our Freight Forecast. We attribute at least part of this to the unusual tariff-related inventory pull-forward that occurred late last year,” Vieth noted.
Regarding the supply-demand balance, Vieth said, “Although the Volume Index reading improved slightly, it was outweighed by the higher Capacity Index, giving us the loosest industry supply-demand balance in almost three years (April 2016).”
He added, “Both elevated Class 8 tractor production and soft freight volumes will keep the supply-demand balance loose until freight improves, capacity tightens, or both.”
Demand Strength, Stagnating Freight Growth
According to ACT Research’s (ACT) latest State of the Industry: Classes 5-8 Report, April’s Class 8 metrics generally aligned with expectations, with the lone exception of cancellations, which continued to trend lower.
“Data continue to tell the same stories we have been reporting. First and foremost, the story remains one of current demand strength: The backlog remains jam-packed and robust retail sales highlight good follow-through on all those orders that were booked in the last half of 2018,” Vieth said. “The second story starts with those softening freight metrics, pivots on robust build and sales, and ends with the reality of a record new Class 8 inventory. In short, freight growth is stagnating, even as Class 8 population growth is accelerating.”
Regarding the medium duty markets, Vieth commented, “Medium duty metrics remained in-line with expectations again in April, as most metrics were close to their prevailing trends.”