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Truck and trailer orders experience slippage

May 26, 2015

Class 8 and medium-duty truck orders, along with those for trailers, generally declined in April according to data tracked by ACT Research Co. (ACT).

Class 8 net orders were just over 22,400 units in April, while Class 5-7 net orders topped 17,700 units, the firm said.

“On a seasonally adjusted basis, net Class 8 orders in April were 21,288 units, the lowest reading since November 2013 – a 17-month low,” Jim Meil, ACT’s principal for industry analysis, said in a statement.

“These are numbers that would be close to an average monthly reading in an expanding economy, but the current context – that the prior six months net orders run-rate was 400,000 [units] on an annualized basis – some correction from these unsustainable levels was inevitable,” he added.

Meil noted that the medium-duty market in April was “satisfactory, but not stellar,” breaking a string of four consecutive months of year-over-year increases.

“There was also a tough comp[arison] at work, with April 2014 being the second strongest orders month of the year, seasonally adjusted, which probably says more about the strength of the base period than about current weakness,” he pointed out.

Net orders for trailer in April, however, dropped 22% versus March to 18,000 units, with Frank Maly, ACT’s director–CV transportation analysis and research, adding that the fact that trailer net orders are down year-over-year for the third consecutive month “will likely cause much conversation, and perhaps even concern,” for some in the industry.

“While there is no escaping that fact, one must consider the context of the recent over under-performance,” he stressed. “The tremendous surge in orders experienced from September to January was front-loaded as large fleets … pulled the seasonal cycle forward in a race to get orders placed to ensure timely deliveries. Our view that 2015 will be the best trailer market since the late 1990s remains unchanged.”

Yet U.S. several key U.S. economic metrics are not trending in the right direction at the moment, which could complicate truck and trailer order projections.

Lindsey Piegza, chief economist with investment firm Sterne Agee, noted last week that the Philly Fed Outlook Index unexpectedly fell from 7.5 to 6.7 in May, while the Kansas City Manufacturing Index also surprised to the downside, falling further from negative 7 to  negative 13 in May.  “Finally, the Chicago Fed National Activity Index remains in the red for the fourth consecutive month, rising slightly from negative 0.36 to negative 0.15 for April,” she said.

In terms of U.S. labor market data, jobless claims rose by10,000 to 274,000 for the week ending May 16 – a four-week high – though the four week average overall, however, fell from 272,000 to 266,000.

“The Fed [Federal Reserve] continues to acknowledge the slowdown in U.S. household spending … [and] lingering concerns regarding the strength of the U.S. dollar and low energy prices, both undermining growth and prices,” she said.

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