Taken together, new reports out on September’s new commercial- vehicles orders and quarterly freight tonnage as well as current and near-term economic conditions, paint a positive view of the road ahead for motor carriers as the year winds down.
For starters, ACT Research Co. (ACT) has reported that both medium- and heavy- duty (Class 5-8) new vehicle orders were again at “healthy levels” in September.
Per the firm’s latest State of the Industry report, total net orders for Class 8 trucks reached 24,842 units— pushing that category up 31% year-over-year.
Class 5-7 net vehicle orders came in at 19,486 units. That marks the third-strongest order level attained since early 2008, ACT noted.
“The past couple of weeks have seen volatility in equity markets, but key economic and freight data points relating to commercial vehicle demand continue to trend positive,” remarked Kenny Vieth, ACT president & senior analyst.
Underscoring the strength in heavy-duty order activity, Vieth pointed out that “through year-to-date September, Class 8 net orders have been booked at a seasonally adjusted annual rate of 349,000 units. That rate is above the 328k orders booked in the past 12 months.”
As for Class 5-7 net orders, he said that compared to a year ago, net orders were up 15% last month. However, trucks are not the basis of this strength. “Within this segment of the market,” Vieth explained, “trucks fell 4% year-over-year, but buses rose 156% and RVs rose 31% year-over-year. With housing activity generally trending sideways in recent months, so too have medium-duty truck orders and backlogs.”
Meanwhile, research and forecasting firm FTR has reported exceptionally strong net trailer orders of 32,111 units for September. Per FTR, trailer-order activity for the month was up 32% from August and “a hefty 80% year-over-year.”
What’s more, FTR found that September trailer orders “were larger than the predicted seasonal increase due to the tremendous strength of the current trailer market and the booking of orders into 2015
Don Ake, FTR’s vice president of Commercial Vehicles, pointed out that orders for last month at the larger trailer makers “reflect their increasing capacity constraints, which are recognized by the larger fleets. To firm up their requirements for all of 2015, those fleets have started placing large orders now.”
As for freight, Bob Costello, chief economist for the American Trucking Assns. (ATA), stated this week that during Q3, “truck tonnage jumped 2.4%” from Q2 and it “surged 4% from the same period last year,” Costello said. He also noted that the third-quarter tonnage average was “the highest on record.”
The MLFI-25 is the only index that reflects volume of commercial equipment financed in the U.S. It reports economic activity from 25 companies representing a cross section of the $827-billion equipment finance sector,
September’s MLFI-25 index shows that new business volume for these firms last month was up 21% year-over-year, up 31% month- to-month and up 8% year- to-date.
“All MLFI-25 performance metrics for September indicate a favorable environment for business investment,” remarked William G. Sutton ELFA president & CEO. “Strong originations and solid portfolio performance, together with a slight uptick in hiring, all point to a robust equipment finance sector as we move into the final quarter of the year.
“We will keep our eye on these positive indicators as the U.S. economy continues to react to geopolitical events, a worrisome global economic outlook and volatile U.S. equity markets,” he added.
Commenting on the index’s September showing, William Henak, president & CEO of TCF Equipment Finance, said that the continued growth in quarter-end new business volume was both “expected and encouraging based on the year-to-date momentum and historically strong performance for this period in the equipment finance sector.”
Henak did caution that “concern for the rest of the year remains due to the growing number of negative news headlines, volatile capital and equity markets, unresolved tax extender legislation, and the potential for Federal Reserve actions that may influence interest rates.
“All of these factors could negatively impact new business volume in the 4th quarter, which is historically strong,” he continued. Yet, Henak added that “despite these concerns, this year is expected to finish strong.”
Meanwhile, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for October came in at 60.4. The foundation said that reading is “slightly better than the September index of 60.2, with survey participants indicating increasing or consistent demand tempered by U.S. economic concerns.”
This index found that when asked to assess their business conditions over the next four months, 23% of the executives responding said they believe business conditions will improve over the next four months, down from 36.4% in September. What’s more, 74% of the respondents believe business conditions will remain the same over the next four months-- up from 60.6% in September. Just 3% believe business conditions will worsen, unchanged from the previous month.
As for the economy in general, October’s MCI-EFI revealed that 28.6% of the survey respondents believe that U.S. economic conditions will get "better" over the next six months-- marking a slight increase from the 27.3% who believed so in September. On the other hand, 68.6% of the respondents indicate they believe the U.S. economy will "stay the same" over the next six months. That’s up from 66.7% in September. And only 3% believe economic conditions in the U.S. will worsen over the next six months-- down from the 6% who believed so last month.
Looking out to 2015, the just-released Annual Fleet Study produced by CK Commercial Vehicle Research (CKCVR) provides a sense of how fleet demand for new vehicles next year may well shape up.
Based on the responses of 66 representatives of small, medium and large for-hire, private and government fleets— which together operate over 40,000 Class 8 vehicles— the study found that a “slight decline in equipment purchase plans” by fleets s expected for 2015 vs. what was planned for 2014. The fleets also indicated that they expected to accept a higher percentage of deliveries in the first half of year.
In addition, CKCVR said the study found that fleets are adding “new technologies that maximize safety and/or fuel efficiency; or improve driver potential, recruitment and retention” to new equipment.
The fleets surveyed also reported that while in-house maintenance was “still the preference, some changes are occurring” in that regard as well. In that vein, the study found that “Original-equipment truck manufacturers are playing an increasing role as a resource for fleets– for information, outsourced service and replacement part purchases.”
Not surprisingly, the fleet respondents to the CKCVR study consider the driver shortage to be “the key issue facing trucking fleets-- impacting their ability or willingness to add capacity.”