Orders for North American Class 8 tractors continue to strengthen in the fourth quarter of 2010. And while this is not unusual – this is historically the peak season” for new truck orders – the level of order activity is higher in some ways than expected, suggesting a more positive outlook for trucking going into 2011.
FTR Associates’ preliminary data shows November Class 8 truck net orders for all major North American truck makers totaled 26,005 units. That covers the U.S., Canada and Mexico as well as exports and equals a 38% jump over October and the highest monthly order level since May 2006.
November also marked the fourth consecutive month-over month-increase in orders, said Eric Starks, FTR president. He explained that net order activity for the recent six-month period including November equated to an annual rate of 198,510 units.
“The fourth quarter usually marks a ‘season peak’ for orders, but what’s interesting is that the number of orders is at the high end of our expectations,” Starks told Fleet Owner. “It’s not an ‘oh-my-gosh’ level, but it’s still unexpected.”
Starks added that FTR has projected a normal seasonal increase in orders of between 22,000 and 25,000 units, but as November’s number came in slightly above that range, it can be “chalked up as a win” for the industry.
“The fact that truckers are willing to start ordering equipment is certainly a good sign,” he said. “It is clear that we are in a recovery period for the new truck equipment market.”
One reason fleets are ordering new equipment is the continued uptick in freight volumes seen in the fourth quarter. Jon Langenfeld, senior transportation analyst with investment firm Robert W. Baird & Co., said in his latest Freight Flow report that his firm’s domestic freight index topped 5.9% year-over-year in October. That compares to 4.3% in September and 4.8% for the third quarter of 2010 vs.the same period in 2009.
“October trends were stable with seasonal expectations,” Langenfeld said. “That said, a few contacts indicated volume began improving modestly to end October, with further contacts indicating volumes have improved modestly into mid-November, providing some optimism for a modest late peak season pickup.”
Notably, Langenfeld said that while retail trends remain weaker relative to the first half of this year, industrial demand outlook remains favorable with trends steadily improving throughout most of 2010.
“Looking into 2011, we expect more modest overall demand trends consistent with expectations for low-single-digit GDP [gross domestic product] growth, but expect industrial-related end markets to outperform retail,” Langenfeld remarked.
FTR’s Starks added a note of caution to the outlook for Class 8 orders regarding the durability of the current surge. While he does expect orders to fall off from November into December and then again in the first quarter of next year – a typical industry order pattern – the absence of small and medium fleets from the market remains a concern.
“We do know that leasing companies and large fleets were instrumental in pushing the orders higher these last months,” he explained. “What we are not seeing are the smaller and medium- size fleets participating at the levels we would normally expect during a recovery. Until we see this group jumping back into the market, we will continue to be optimistic-- but with a degree of caution.”