Falling North American class 8 truck orders is a sign that the sales market is returning to normal levels, rather than an impending major recession in the freight economy, according to Eric Starks, CEO of FTR.<\/p>\n
AS reported by Truck News, Starks explained that while manufacturing is flat, the data doesn\u2019t reflect a recessionary environment, but rather a correction. FTR\u2019s tracking of monthly freight loadings has flattened out, but there\u2019s no downward spiral that should spark concern, Starks noted.<\/p>\n
\u201cThe market continues to be relatively healthy,\u201d he said. \u201cWe are seeing a normalization within the market.\u201d<\/p>\n
The spot market has seen rate declines, but remains relatively healthy, and above the five-year average, Starks pointed out. FTR is projecting freight growth of 1% to 1.5% through the balance of this year and next.<\/p>\n
Don Ake, vice-president of commercial vehicles for FTR, reiterated that the Class 8 truck market is coming off some tremendous years; four of the top seven production years ever have occurred within the past six years. The Class 8 production rate this year is forecast to reach 353,000 units, compared to 323,500 last year. The all-time record was 2006, when 371,000 trucks were built, aided by the EPA07 emissions pre-buy.<\/p>\n
But there\u2019s no hiding the fact Class 8 orders have plunged since the highs set in the fourth quarter of 2018.<\/p>\n
\u201cIf looked at in a vacuum, you\u2019d think things are horrible,\u201d Ake admitted. However, he noted if the 2018 and 2019 monthly order numbers were to be averaged out, they\u2019d still come in above the seven-year average.<\/p>\n
\u201cThe market is trying to get back to normal,\u201d said Ake. And he\u2019s also encouraged by the fact there\u2019s been no spike in cancellations. \u201cI thought once we got into mid this year, we would see cancellations spike. What we saw was cancellations increase, but not spike. (Customers) are taking most of these trucks, which is a very good sign for the market. It\u2019s a normalization of the market, not a crash of the market.\u201d<\/p>\n
Class 8 retail sales and build rates also remain strong, but Ake said most OEMs have announced build rate slowdowns. Backlogs are being drawn down, but remain at historically high levels. Ake said October will be an important month for orders. It\u2019s reasonable to expect 20,000 Class 8 orders a month in the coming months, Starks said. Truck inventories are high, meaning retail sales will need to pick up to prevent unhealthy inventories for dealers.<\/p>\n
FTR\u2019s forecast for 2020 heavy truck sales in the US, Canada and Mexico are 260,000 units in 2020, 255,000 units in 2021, and 245,000 units in 2022. However, Ake admitted it\u2019s a \u201cslightly optimistic\u201d forecast. \u201cWe don\u2019t see the market crashing, as long as GDP stays up,\u201d he said.<\/p>\n
Starks added 245,000 units is about equal to replacement demand.<\/p>\n