Heavy-Truck Orders Collapse Stunning 81%. Lowest Since 2010

Order backlog still feeds truck makers, but they don’t disclose for how long.

Orders for Class 8 trucks – the iconic trucks that haul part of the economy’s goods across the country – collapsed by 81% in July compared to July last year, to 9,800 units, the lowest since 2010, according to FTR Transportation Intelligence on Friday. It was the ninth month in a row of year-over-year declines. But “declines” is not the right word. This year so far, these year-over-year “declines” ranged from -52% to -81%, which makes for a stunning collapse of the historic boom last year:

“Fleets continue to take a wait and see approach to 2020 equipment,” FTR chief intelligence officer Jonathan Starks said in a statement Friday afternoon. “Potentially higher equipment costs, uncertain demand, and enough available capacity in the market are keeping order activity at bay.”

The phenomenal boom of orders for Class 8 trucks reached over 52,000 orders a month in July and August 2018, in a desperate explosion of orders amid a mind-boggling event then called a “capacity panic,” a panic that the US would run out of trucks to haul the sudden surge of goods produced or imported by “the greatest economy in the history of our country” – as President Trump put it last year.

And this created an ordering panic where every trucking company, from J.B. Hunt [JBHT] and YRC Freight [YRCW] on down, tried to get its orders in ahead of the others because the backlog was already huge and wait-times were getting longer. But as freight shipments in the US began to return to normal, and then began to decline, instead of booming, the panic subsided, and truckers reacted by slashing their orders, and cancelling what they could:

Freight volume in terms of shipments by all modes of transportation – truck, rail, barge, and air – has been declining on a year-over-year basis for the seventh month in a row in June, according to the Cass Freight Index for Shipments. July shipments, to be reported in mid-August, will likely show eight months in a row of declines:

And so the capacity panic has turned into a capacity glut. The trucks that were ordered last year are still being delivered. The backlog has likely shrunk by more than half over the past 10 months to below 200,000 units. And those 2019 model-year trucks are still being built, and they’re still coming. Manufacturers have just opened the ordering process for model-year 2020 trucks, and obviously, orders are only trickling in.

Given the boom in orders last year, and the ensuing historic backlog at truck makers, actual truck sales as measured by deliveries to trucking companies, have been limited only by the capacity of the truck makers to manufacture the trucks.

In July, truck makers delivered 43,200 Class-8 trucks, according to data released by the Bureau of Economic Analysis on Friday. Over the past few months, sales have nudged up against the records set in 2006 through December that year. But an epic plunge in sales began in January 2007 – well before the financial system officially threatened to fall apart:

Truck manufacturers have been on cloud 9, reporting record sales while eating through their backlog. But cloud 9 is now dissolving into ambient air. During Transportation Recession 1, after the truck makers had worked through their backlog, the music switched to earnings warnings and layoffs.

Sales follow orders with a lag, and that lag is long, thanks to the record backlog last year that is now being eaten away. Truck makers – Peterbilt and Kenworth, divisions of Paccar [PCAR]; Navistar International [NAV]; Freightliner and Western Star, divisions of Daimler; and Mack Trucks and Volvo Trucks, divisions of Volvo Group – will eventually fess up to the reality of the collapse in orders. But not yet.

Truck manufacturers don’t disclose their order backlog. For example, Paccar says, “As a practical expedient, the Company is not disclosing truck order backlog, as a significant majority of the backlog has a duration of less than one year.”

Investors are deemed to have no need to know. Therefore, industry order backlog figures are estimates. But order backlog is a crucial data point: A large backlog can paper over a plunge in orders for a long time. And then suddenly, it’s gone.

For example, during Transportation Recession 1, orders for Class 8 trucks began to plunge in early 2015 and hit the lowest levels in mid-2016 through October 2016. By November 2016, orders started to tick up from those desperately low levels. However, production and sales, fed by the order backlog, didn’t start dropping until April 2016 – over a year after orders had begun to plunge. But then they dropped 23% and stayed at low levels for months, leading to said earnings warnings and layoffs.

This time around, orders started plunging in November 2018, so the order backlog will keep truck makers busy through 2019 and likely into early 2020, before the plunge in orders is going to hit production and sales – unless a miracle happens, and orders suddenly resurge in a massive manner. But miracles have become rare in the trucking business. This is why we would like to know Paccar’s order backlog, and that’s precisely why Paccar doesn’t want us to know.

US freight shipments fell for the seventh month in a row. After the boom comes the bust. Read…  “Transportation Recession” Gets Uglier

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate “beer money.” I appreciate it immensely. Click on the beer mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

 

  57 comments for “Heavy-Truck Orders Collapse Stunning 81%. Lowest Since 2010

  1. Iamafan
    Aug 3, 2019 at 3:37 pm

    What else is bad out there? No wonder the Fed cut.

    • Unamused
      Aug 3, 2019 at 4:25 pm

      No wonder the Fed cut.

      The Fed cut rates because of heavy political pressure and because they don’t want to be scapegoated for what’s coming.

      What else is bad out there?

      The Executive Summary runs twenty-six volumes. Care to narrow it down a bit?

      • Aug 3, 2019 at 11:20 pm

        Since its high in March the 3-Month Bill had declined by some 42 beeps. To last week and, of course, the actual cut dropped the decline to 50 bps.
        The 25 is intended to make it look as if the Fed is “in charge” of interest rates.
        The Bill rate always declines in a contraction and the Fed follows, by some months.

        • Aug 4, 2019 at 10:34 am

          Good point, segway to Powell’s comment about the cut helping manufacturers, when by his own account borrowing costs are not an issue. Not an issue because real rates have already dropped.

    • medial axis
      Aug 3, 2019 at 4:36 pm

      The more they cut the worse it’ll get. How is cutting supposed to help the real economy, main street? The only thing that’s trickling down is higher rents, which further choke the economy. But then the FED can hardly raise rates by much either, as the resulting flood of bankruptcies would reveal the financial sector, the so say source of all wealth, for the bubble it is. As more time passes it is becoming more apparent there is no way out. We live in an interesting time. Get the popcorn and dig out that old Thunderclap Newman record, revolution is in the air. Only there won’t be a flag to follow, as you may have noticed. It’s a decentralised revolution and so unstoppable.

      • Just Some Random Guy
        Aug 4, 2019 at 9:01 am

        “How is cutting supposed to help the real economy, main street? ”

        True. Nobody on Main St buys stuff like houses or cars.

      • NBay
        Aug 4, 2019 at 10:00 pm

        I recall signs painted often on backs of semi vans, “Don’t cuss this truck, it’s carrying something for you!”

    • Rowen
      Aug 3, 2019 at 4:53 pm

      Recreational boat sales have been awful all year, but June was ugly. A couple of local manufacturers expanded the past couple of years are now caught with their pants down.

      • joe saba
        Aug 4, 2019 at 10:26 am

        didn’t June bring in HEAVY RV sales – likely due to heavy discounting

    • Lance Manly
      Aug 3, 2019 at 6:18 pm

      The Fed cut because of the overhang of trade uncertainties. A 2.5% rate is still accommodative and had little to do with the issues.

      • Lance Manly
        Aug 3, 2019 at 6:46 pm

        BTW: The Upshot from the NYT had a good article on why lowering rates now probably does not really matter

        “Take spending on consumer durables. A recent study by economists at the Federal Reserve Bank of Minneapolis and the University of California, San Diego, notes that these purchases occur in lumpy spurts. People tend to spend nothing on such items for long periods, then spend a lot all at once, when money is cheap and prices are enticing.

        The problem now is that once-in-a-lifetime offers don’t generate the same excitement if they are repeated every week. And, the study suggests, after 10 years of extremely low interest rates, there probably aren’t many consumers with pent-up demand, waiting for rates to fall. Because so many people have already made their big purchases, the economic kick from a rate cut is smaller than it would be at a “normal” time.”

        • Sporkfed
          Aug 3, 2019 at 11:27 pm

          Perhaps the rate cut’s main purpose
          is to allow corporations and individuals to refinance existing debt.
          Kicking the can down the road so to speak.

        • ru82
          Aug 4, 2019 at 1:35 am

          @sporkfed
          Yep….I know two people who are refinancing this week who bought house the past 2 years.

          This is giving them a couple of hundred dollars more a month of discretionary spending. Now they can spend more eating out…etc.

        • Iamafan
          Aug 4, 2019 at 9:17 am

          The same newspaper has an article about you-know-who reduced his variable rate interest payments to DB by $1 mil. after the rate cut.
          That’s enough incentive don’t you think?

      • Unamused
        Aug 3, 2019 at 6:55 pm

        Save it for Buzzword Bingo, Lance.

      • Dennis Gauss
        Aug 4, 2019 at 2:55 pm

        Check out the number of Zombie companies that are using the low interest rates to pay their shareholders and bills.Not just small FBN companies either.It’s the classic Ponzi scheme and it is huge !(Basically what Washington is doing with the national debt )!

    • sunny 129
      Aug 3, 2019 at 8:51 pm

      Does it really help?

      Does that even matter?

      When was the last time in the history of Federal Reserve (since 1913) the Fed cut the rate for ‘insurance’ purpose?

      Later during press interview, the conclusion more confused ever re future rates or even possible rate increase! Now wonder Mkts tanked right after 2.30PM!

      Me think, the Fed is clueless!

      • Aug 3, 2019 at 11:22 pm

        “Clueless”–Right on.
        It is long theories and weak on how markets really work.

      • MD
        Aug 4, 2019 at 3:38 am

        Well they’re trying to prop up a system that requires perpetual growth, whilst at the same time seeking to pay people less and less to increase short-term profits.

        Given that those two things are naturally mutually exclusive, it’s hardly surprising that we’re ‘through the the looking glass’ and and into the weird territory of QE, ZIRP etc.

        Supporting an irrational system via irrational actions.

        • Winston
          Aug 4, 2019 at 8:36 am

          “Well they’re trying to prop up a system that requires perpetual growth”

          Yep. Money is created through the issuance of debt, but the money to pay the INTEREST on that debt is not created when that new money is created and loaned. Thus, growth (increasing issuance of debt) is required to keep the game going. That defines an exponential curve of debt growth and the slope of that “required new debt” curve becomes impossible to meet without resetting it to a shallower slope via only thing that will accomplish that – bankruptcies which EXTINGUISH debt. Central banks and governments have not allowed those required MAJOR bankruptcies for decades. Thus, the situation we’re in.

        • Rowen
          Aug 4, 2019 at 2:37 pm

          The perpetual growth was fine, since the population was growing at a very positive clip, especially post-WWII.

          Now, not so much.

    • timbers
      Aug 4, 2019 at 12:05 am

      Giggles…Forgive but for a moment there I thought you said…that you actually believe…that the Fed cared about the econony…GIGGLES

  2. Wendy
    Aug 3, 2019 at 4:37 pm

    52000 orders per month in July and August. Over 100K trucks. Imagine 100,000 trucks parked in one lot. After these trucks are put in service, one would think that future orders would naturally collapse…perhaps as much as….wait for it….81%.

    The other question is if in a future world nearly all retail goods are sold by Amazon, would the Kass freight index naturally decline? Imagine all manufacturers and importers shipping goods to Amazon warehouses by big rig or train. From that point UPS trucks, USPS vans, Amazon vans, and Uber/Lyft drivers delivered the goods from the warehouses. Are these included in the Kass Index? No? So are we really heading for a transportation recession, or using a broken indicator?

  3. TownNorth
    Aug 3, 2019 at 5:29 pm

    The Transportation Boom between Recession 1 and Recession 2 occurred while the Fed was raising rates. For what it’s worth..

  4. Michael Engel
    Aug 3, 2019 at 6:38 pm

    1) Fed cut :
    The Fed raised x4 times in 11M, possibly in response to Druggie SOS call for an emergency help :
    “I am falling and I cannot get up, save me JP, give me a hand”
    US “jump” didn’t create a European “jump”. It was too late.
    Europe is underwater. Viscosity forces foiled US effort. The German 10Y was rising from July 2016 til Jan 2017. After 6M rise, it spent 1Y in a trading range.
    When JP realized that the Fed hand is not strong enough to save the world, he gave up and decided to adjust (my speculation).
    2) US trade war with China intensified.
    Long Beach, Ca will pay the price.
    Transport from Long Beach (and friends), by trucks & trains,
    will be falling long terms.
    The DJT in recession.
    Not a 1- 2 month correction.
    The DJT destruction will be over when USMC mfg activity
    and energy demand will grow.

  5. David Hall
    Aug 3, 2019 at 7:41 pm

    Artificial intelligence is supposed to be a game changer for the logistics people. More efficient delivery systems = less waste. This heavy truck sale slowdown seems in sync with a decline in auto sales.

    The life expectancy of an over the road trucker is 61 yrs, This might have something to do with a truck driver shortage.

    • MD
      Aug 4, 2019 at 3:44 am

      ..which brings us back to the question of, given the fact that delivery driving is such a large sector of employment in the USA’s ‘post industrial’, service based economy, who’s going to be buying these products once those jobs are eliminated..?

      Or will they all be able to find employment in Trump’s new powerhouse manufacturing sector, whenever tariffs have done their job and corporations are forced to return their factories to the USA?

    • NBay
      Aug 5, 2019 at 4:35 pm

      I know trucker who drove big rigs SF-Oakland, (likely both airport facilities, too) to Petaluma and for at least 25 years, don’t know what he did before, but that is real high pressure stuff. Was good, always hit dock first shot with 40 footer and perfectly.
      Anyway, he was having coffee with us at age 78-82, and linguistically hip and lively and healthier than some age 60. Tall, thin, had upbeat attitude, and took zero meds (Rx or OTC), unlike most. An exception for sure, but he steered clear of Medical Industry. Hasn’t shown up recently, but just an anecdotal thought on trucker life expectancy.

      • NBay
        Aug 5, 2019 at 4:42 pm

        Forgot- Retired at 70 and rode Harley, also told previous trucking stories. Fairly sure it was close to lifelong occupation.

  6. driver8
    Aug 3, 2019 at 10:00 pm

    I drove a truck over the road for 12 years (’02 -’14). When I began I heard about a ” driver shortage.” When I left there was still a supposed “driver shortage.” In all those years I never saw undelivered freight piling up on the docks.
    Before truck driver I was an aircraft mechanic. Going to school to get my A&P license I heard about a “mechanic shortage.” Out of school, couldnt find a job to save my life (no experience). Long story short – never saw a mechanic shortage either.
    The “stakeholders” in most industries are large companies, CEO’s and industry propagandists talking their book. I have found their words often have no relevance to “the little people” actually doing the work.
    If you detect a hint of bitterness in my words …
    It’s been a long education.

    Mr Hall – Yes, over the road trucking is a very unhealthy life style. More than once I saw ambulances in the truck lot taking another broken-down “knight of the road” to his final junk yard.
    Throw in below minimum wage pay (considering all… the… hours… put… in) and it aint too shiny.

    • Unamused
      Aug 4, 2019 at 7:28 am

      When I left there was still a supposed “driver shortage.” In all those years I never saw undelivered freight piling up on the docks.

      Of course not. There was never a “driver shortage”. There was only a shortage of drivers who could be weaseled into working for cheap. Similarly, there is not now any “shortage” of STEM graduates, as been shown. There is only a shortage of STEM graduates who can be weaseled into working for cheap. They must always be a glut, to keep costs down and profits up.

      And it works for other purposes, and there are many examples. It goes all the way back, a way of getting people to screw themselves, and willingly, in ways which serve the interests of their masters. Edward Bernays extended and refined the approach a hundred years ago, and it has been universally adopted, until now it is much more than mere marketing. As has frequently been noted and quoted, the people can always be brought to the bidding of their leaders, no matter how it ruins them: “It works the same way in any country.”

      People are able to figure it out, of course, or were, once upon a time. You have to be carefully taught. You’ve got to be taught from year to year. It’s got to be drummed in your dear little ear. You have be carefully taught. Induced mass screen addiction may yet prove to be decisive.

      • RD Blakeslee
        Aug 4, 2019 at 8:20 am

        “People are able to figure it out, of course, or were, once upon a time.”

        We still are. Problem is, many folks submit to victimhood, where a resolutely executed plan for personal escape would work.

        • Iamafan
          Aug 4, 2019 at 9:08 am

          Hopefully they learn that debt ain’t income or richness. Notice how financially dumb a lot of people are. They drank the Kool Aid.

        • NBay
          Aug 5, 2019 at 5:36 pm

          Subversive and un-American! ;)

    • Paulo
      Aug 4, 2019 at 8:28 am

      Sorry to hear about your experience and practical education, driver 8.

      I heard the same thing in aviation. I was what would be called a specialty/utility pilot when aviation was still regulated in Canada; west coast float pilot. I worked myself into a decent union job only to experience de-regulation and its effects on wages and working conditions. I then had to be a more hired gun than full time employee, which paid very well occasionally, but was still forced to slot in and out of construction to make ends meet. Finally, the long awaited ‘pilot shortage’. Big pilot shortage, and coupled with increasing regulations and silly rules, many companies have just shut down. A company can’t find experienced pilots insurance companies will okay, and Govt restricts length of duty day and earnings window, fuel and insurance costs escalate, then certain industries will wither and disappear.

      Anyway, can’t complain how things turned out in the end, but I sure found out over the years that flexibility and a toolbox full of skills was the way to ensure good employment. With your mechanic skills, and driving ability/experience you could earn a minimum of 120k per year in the logging industry in BC. Lots of drivers in mega construction projects right now, too. Teamsters local 213 jobs, my old union. :-) They are also screaming for aircraft engineers in Canada these days, all over Canada. You would go to the top of the immigration list if you applied in 2019 and listed an aviation engineer ticket. (Engineer in aviation means mechanic for those not in the industry).

    • Petunia
      Aug 4, 2019 at 10:43 am

      Same thing has been going on in tech for at least 20 years. Our graduates are waiting tables while the cheap labor from Asia is taking our jobs.

    • Ken
      Aug 4, 2019 at 12:02 pm

      driver8 I am a retired A&P mechanic. When I was in school mid 1960’s there was going to be a A&P mechanic shortage as well. That line has been around for a long time.

  7. 2banana
    Aug 3, 2019 at 10:06 pm

    Just a small ancedotale data point.

    There is a mall close to me. It is still open and doing ok but has seen better days.

    There is a half empty factory near the mall with a huge parking lot.

    Today driving by the factory. There are at least 200 tractor trailers (less the cab) parked there, in tight formations.

    And at the corner of the mall, at least 50 tractor trailer cabs parked all in a row.

    I have never seen that before.

  8. SGT Tuttle
    Aug 4, 2019 at 1:35 am

    Is it all over but the shouting?

  9. Serge
    Aug 4, 2019 at 2:37 am

    Hard to justify purchasing $170k truck with the rates below $2/mile. I think 3rd quarter we will start see a lot more trucking companies going out if business. Those who survive will benefit greatly when there won’t be enough trucks to haul freight.

    • Iamafan
      Aug 4, 2019 at 6:45 am

      Best explanation I have heard so far. Too many high blue bars previously. Too much competition now. Just cleaning up the zombies now.

    • Rowen
      Aug 4, 2019 at 2:42 pm

      One of the things that our Ports Authority has done is to build several “inland ports” to reduce the dependence on trucks, in favor of rail.

      Good for Warren Buffett, bad for actual workers. Shame that taxpayer dollars paid for it…

  10. ooe
    Aug 4, 2019 at 7:38 am

    The reason being is the economy will be in recession by the fall. factories are not producing per the PMI by Markit and is 51.7 per ISM . thus, there is nothing to ship. the industrial recession has spread to services (transportation). the NFP figures showed + 164000 jobs creation less 41000 in downward revisions. thus, there was only 124000. more jobs in July than June. thus, the jobs picture was disappointing.

    • nicko2
      Aug 4, 2019 at 8:02 am

      Bring it on, it’s long overdue.

    • sierra7
      Aug 4, 2019 at 10:57 am

      Have family in a medium techie business in Santa Clara Va. In business for more than 35 years…..successful. They see a recession coming also in the latter part of this year 2019 or for sure in 2020. They are planning for it now.

  11. DSB
    Aug 4, 2019 at 8:20 am

    I have been told the manufacturers have implemented rules on dealers for orders. The rules limit the number of trucks a dealer may place on order. Those rules were not in place last year during the panic. An unfair question, but how much of the change is due to these new rules?

  12. Iamafan
    Aug 4, 2019 at 11:33 am

    How much of the previous truck buying were done because of rosy forecasts, tax breaks, and cheap money (credit) ?

    Since the global demand weakened, how much do we really need now? Supply and Demand should dictate, right? I’m not sure you can kick the can down the road too far.

  13. timbers
    Aug 4, 2019 at 1:26 pm

    The internets are saying Fed must cut rates again because insurance & tariffs and it’s the Fed’s job to make stock market & profits go up because seems like it’s almost illegal for businesses to lose money if their costs if they do go up too much to get more profits than before.

  14. TXRancher
    Aug 4, 2019 at 2:28 pm

    Based on comments here and some additions:
    1) Raise tariffs high enough to force manufacturers back for domestic production. They need our market more than we need theirs (based on trade imbalance). Method used for prior 200 years.
    2) Eliminate Hx visas until all domestic workers are fully employed.
    3) Increase tax rates for high incomes to eliminate budget deficits and start reducing debt. Income TBD but, really, how much do you need to live comfortably.
    4) Eliminate stock buybacks like pre-1982 to force investments/wages.
    5) Tax stock trading to reduce speculation.
    6) Fix Social Security and Medicare shortfalls with well known solutions.
    7) Buy real beef instead of magic replacement stuff. Haha.

    • Rowen
      Aug 4, 2019 at 2:40 pm

      Damn, a texas rancher starting to sound a bit — socialist?

      • TXRancher
        Aug 4, 2019 at 5:05 pm

        Haha. Far from it. But looking back at my comment it sure looks like it. I was trying to capture summary of what has been suggested in previous comments here.

        • Unamused
          Aug 4, 2019 at 6:02 pm

          Far from it. But looking back at my comment it sure looks like it.

          Socialist? Not exactly.

          If you’re an independent rancher, you would be in control of the means of production, and not a corporate employer. Technically that would make you a Marxist, like doctors and dentists in private practice and independent truckers. But at least you’re not a socialist, right?

          But don’t get your hopes up. Corporate producers are putting family farms and ranches out of business by the thousand. But you probably knew that.

        • NBay
          Aug 5, 2019 at 6:33 pm

          Amused,
          He did say “income TBD” and no mention of “death” tax, and in light of that thanks for cluing me in on Bernays….on list of trails to follow in WSt folder…..knew other ref since Haight St days 66-67.

  15. timbers
    Aug 4, 2019 at 8:20 pm

    The internets are saying dat Fed don’t see no inflations. If dat Fed don’t see no inflations dat Fed must cut interest rate until dat Fed can see inflations. If dat glove don’t fit, jury must aquit.

    • Aug 4, 2019 at 8:52 pm

      The internet sez whatever. The Fed “sees” inflation, and it sees that the inflation has recently been firming, but is still a little below where it wants inflation to be.

      BTW, big trucking companies have been able to raise their contract freight rates they charge their clients (shippers) and that’s how they have been keeping their revenues from falling. Inflation has nothing to do with orders and volume. But with price.

      • Unamused
        Aug 4, 2019 at 11:57 pm

        The internet sez whatever.

        The internet says everything and its opposite. My usual approach is to pick and choose whatever happens to support my position. It’s all gotten so much easier now that scruples are out of style.

        Regardless of the vagaries of currency valuations, truckers, like most people, still have to deliver. And for that, we’re at the mercy of institutions apparently lacking in scruples, and precious little appreciation of truckers.

      • NBay
        Aug 5, 2019 at 7:00 pm

        Got it. To both of ya’s, in separate posts.

Comments are closed.