September sees freight, truck orders soften

Reflecting an economy that is still sluggish overall, September saw freight demand “flat-lined” and weaker Class 8 truck orders. However, a new study posits that fleets are more optimistic about equipment buying next year.

The American Trucking Assns.’ (ATA) advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 0.4% in September after falling 0.9% in August. In September, the SA index equaled 118.7 (2000=100). Since the level in September was the same as in January 2012, the index has been on a flat trend-line over the past nine months, noted ATA.

Compared with September 2011, the SA index was 2.4% higher, the smallest year-over-year increase since December 2009. Year-to-date, compared with the same period last year, tonnage was up 3.6%.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, equaled 115.3 in September, which was 9% below the previous month.

During the third quarter, SA tonnage increased 0.4% from the previous quarter and 3.4% from the same quarter in 2011.

“The year-over-year deceleration in tonnage continued during September, although I was encouraged that the seasonally adjusted index edged higher from August,” ATA chief economist Bob Costello said.

Costello pointed out that the acceleration in housing starts-- which is helping truck tonnage-- is being countered by a “flattening” in manufacturing output and elevated inventories throughout the supply chain.

“Expect year-over-year comparisons to continue shrinking through the rest of the year as tonnage grew nicely during the last three months of 2011,” Costello added. “As a result, tonnage is expected to increase less than 3.5% in 2012.”

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Remarking on the ATA numbers, analyst Peter Nesvold of Jefferies & Co. reported that “channel checks” by his firm suggest that loads-- rather than tonnage—are “fading again in October after showing signs of life in September. Similarly, weekly diesel consumption indicates that overall freight flows (and industrial production) slowed in the first two weeks of October.”

We expect tonnage growth to decelerate further in the coming months, particularly as YoY comps get tougher,” Nesvold forecast.“Our channel checks generally suggest that loads (which improved modestly in the back half of September with a better-than-seasonal bounce) are off to a slow start in October and trail last year’s levels.”

But he advised that the current trends in tonnage “closely resemble” a typical truck cycle.“We compared this current tonnage cycle to our truck composite model, which aggregates truck tonnage data over the past 40 years, and we found that this tonnage cycle has been unremarkable in a historical context,” Nesvold explained.

“Based on how devastating the ‘Great Recession’ was,” he continued, “we expected to see huge swings in truck tonnage relative to the ‘typical’ tonnage cycle. What we found, however, is that this tonnage cycle has been in line with historical trends. Furthermore, the current truck cycle is 95% correlated with our truck composite model.”

Given the gloomy freight outlook, it’s not surprising to learn that both new and net orders for Class 8 trucks continued to soften in September, according to the latestState of the Industry report released by ACT Research Co. (ACT). The research firm plainly stated that the “perceived threat of bad economic news” is impacting potential truck buyers.

“However, despite the constant barrage of conflicting economic news, truckers are still ordering and buying and OEMs are still building and selling,” stated Steve Tam, vp-- commercial vehicle sector at ACT.

“Even with soft order intake and reduced build schedules, the industry is on track to produce 280,000 to 284,000 trucks in North America this year, an increase of 11% over 2011. It’s tough to stop the wheels of commerce from rolling.”

Tam added that “economic news is taking its toll on buyers who appear to only show up at the last minute to order needed trucks.”

Looking ahead to next year, the Annual Fleet Study for 2012just completed by CK Commercial Vehicle Research (CKCVR) suggests that greater optimism about buying commercial vehicles will be at play in 2013. The research firm noted that 77n representatives from small, medium and large for-hire, private and government fleets responded to this year’s questionnaire.

Key findings regarding purchasing plans included:

· Expected volume of Class 8 fleet purchases for 2013 increased by four percentage points from last year’s report (for 2012 purchases) with a decline in planned Class 5-7 units.

· Planned trailer purchases for 2013 equal 9% of the responding group’s overall population

· 27% of respondents indicated they plan to add some capacity with power unit purchases but overall units designated is small

CKCVR noted that the full report includes detailed information on fleet equipment buying plans for 2013 including brand choices and technology specifications for both power units and trailers by fleet activity and expected volumes. Also included are opinions about CSA and challenges facing the industry, information resources, and the most important factors when choosing equipment brands.