Over 60% of fleet executives in a new survey indicated they planned to place orders for Class 8 trucks in the next three months-- and nearly 50% plan to place trailer orders.

Q1 Outlook: Spring fever for trucking

Feb. 6, 2014
For starters, spot rates are staying up and truck orders rising

Even as winter keeps an icy grip on much of the nation, there are sure signs that trucking in the first quarter will be truly Spring-like. The signals of this include everything from lofty spot-market rates to impressive truck orders to the outlook of a cross-section of fleets as well as the latest news on Real GDP growth.

Starting with the freshest indicator of the positive developments, according to DAT, strong month-end demand for capacity as well as the impact of widespread winter storms combined to keep spot truckload rates “elevated” last week. That data comes per DAT Trendlines, a composite of the firm’s network of load boards.

DAT reported that the average spot rate nationally for van freight was unchanged for the week ending Feb. 1 at $1.94 per mile (including fuel surcharges) and noted that average was up a full 22 cents – or 13%-- compared to last January’s figure.

Van load volume rose 5.9%, which DAT said amounted to a “slight rebounding following a down week.” What’s more, available capacity fell 6%. That drove the load-to-truck ratio up 4.1-- or 13% higher than the week before.

Reefer demand increased as well-- rising 7.8% last week as capacity lost 3.7%. The refrigerated load-to-truck ratio was 12.9, marking a 12% hike the previous week. The national average rate for reefers held steady at $2.06 per mile.

As for flatbeds, the national average rate gained 2 cents to reach $2.09 per mile. Flatbed demand went up 7.2% and capacity was 11% tighter. In this segment, the load-to-truck ratio jumped 20%, reaching 20.6 compared to 17.1 for the week before.

“Weather continues to play a role in the spot market,” DT commented. “Ports were closed in Houston, New Orleans, Mobile, and Charleston, and key airports like Atlanta and Chicago were shut down” hampering the movement of air-truck freight.

Meanwhile, a solid rise again in Class 8 truck orders last month may well reflect that capacity is continuing to tighten in the freight market beyond that which Mother Nature can claim parentage.

Per preliminary figures released by ACT Research, Class 8 North American net orders for January at 34,700 units means the category is up 9% from December’s “strong showing” and a whopping 51% from a year ago.

For Class 5-7 trucks, ACT’s preliminary number is 17,000 units, up 13% from December and an impressive 31% from a year ago.

And research firm FTR has reported nearly matching Class 8 preliminary figures, with January truck net orders at 34,403. FTR said that performance amounted to a 56% year-over-year improvement, with an annualized rate of 347,500 units over the past three months.

Per FTR, January is the second consecutive month with Class 8 orders above 30,000 and it marks the first time back- to-back months have exceeded that mark since 2006. 

“The past four months have seen three of the top five order months this cycle for Classes 5-8,” remarked Kenny Vieth, ACT’s president & senior analyst.

“While the order trend has accelerated, it should be noted that this is the time of year in which Class 8 orders tend to be strong,” he advised. “Typically, orders accelerate in Q4 and remain elevated into Q2 before falling sharply in Q3. If industry build transpires as expected, Class 8 backlogs are expected to have posted a nice gain in January.”

According to FTR, the combined Class 8 order activity for December-January should allow OEMs “to hit Q1 targets with possible increases in production in Q2,” as the firm has forecasted.  

“Orders were way beyond expectations,” emphasized Don Ake, FTR’s vice president of Commercial Vehicles.  “This is another great order month to kick-start 2014.” He noted that order strength was “broad-based” among both manufactures and countries.

“This is a very positive signal for the industry,” he added. “The strong orders are consistent with the tightening of capacity in the marketplace. Fleets and dealers continue to display confidence in the freight market.”
 
ACT’s Vieth noted that “after a pause in December medium-duty [Class 5-7] orders returned to trend in January.”

FTR has also forecast that the U.S. trailer market for 2014 will reach 240,000 units, for a 2.2% increase over 2013.  The firm expects dry vans to record a 2% year-over-year increase while reefers will remain flat and that flatbeds, dumps and low beds are all expected to show greater increases as construction and manufacturing improve. 

As for what fleets are seeing from the vantage point of January, a new report signals a very rosy view of how Q1 will shake out.

Per the latest quarterly Fleet Sentiment Report, conducted last month by CK Commercial Vehicle Research (CKCVR), 62% of the fleet executives indicated they planned to place orders for Class 8 trucks in the next three months.  And 48% plan to place trailer orders. 

Overall, the research firm said its CKCVR Buying Index, which combines activity and volume for both planned tractor and trailer orders, came out as 112.0-- the highest reading since the index was established in 2008. 

Other key findings of the Q1 survey include:

  • Planned orders for both power and trailers are primarily for replacement
  • Larger fleets more likely to be placing orders in early 2014
  • Driver shortage continue to impact fleets of all sizes and vocations
  • Truck pricing has “varied influence” on fleet buying plans
  • Of respondents, 79% perform maintenance in-house

CKCVR noted that 52 small, medium and large for-hire, private and government fleets that together run over 39,000 Class 8 trucks and 96,000 trailers took part in Q1 study.

Backing up the positive trucking news is the recently released U.S. Bureau of Economic Analysis “advance estimate” indicating that Real Gross Domestic Product (GDP) increased at an annual rate of 3.2% in Q4 of 2013. That hike follows a rise of 4.1% in Real GDP reported for Q3.

According to the agency, the Q4 increase in Real GDP “primarily reflected positive contributions from personal consumption expenditures, exports, nonresidential fixed investment, private inventory investment, and state and local government spending that were partly offset by negative contributions from federal government spending and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.”

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