Truck and trailer demand to remain fairly steady in 2014: FTR

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BLOOMINGTON, Ind. — Demand for Class 8 trucks in North America will increase modestly, from 241,000 units in 2013 to 261,000 units next year, according to the latest projections from industry forecaster FTR.

During a Truck and Trailer Outlook Webinar held today, FTR president Eric Starks said most economic indicators point towards favourable conditions for trucking, which should drive more demand for new trucks. However, most of that demand will be for replacement vehicles, Starks noted.

The ISM manufacturing index has been trending above 50 – which indicates it’s in expansion mode – for the past six months, with November’s reading the highest it’s been since April 2011, Starks explained. The order index – a leading indicator for industrial production – has continued to climb, which is another sign of further manufacturing growth in the US.

One cause for concern, said Starks, is that the Q3 GDP data in the US showed an increase in inventory levels.

“From a manufacturing and freight standpoint, that’s not a good sign,” Starks said. “It creates a concern if inventories get too bloated.”

FTR’s Trucking Conditions Index – which considers several metrics that collectively paint a picture of the trucking industry’s overall health – has been in positive territory of late.

“The high number doesn’t necessarily translate into higher rates or higher revenue,” Starks noted. “It only means that those who participate in the trucking sector are doing okay or are healthy.”

He said the Trucking Conditions Index could weaken in coming months, but should remain in healthy territory.

Freight volumes are continuing to “move in a positive direction,” Starks noted. “The freight environment is relatively healthy and in some cases, very strong.”

The American Trucking Associations truck tonnage index is up 8% year-over-year, FTR loading data is up about 6% this year, and an ATA loading index is up about 5%. However the Cass Freight Index – which includes modes outside of trucking – is down about 2%.

“It’s a mixed picture, but the bulk of the items are suggesting healthy tonnage,” Starks said.

Truck utilization, which is an indicator of future demand for new trucks, remains in a “sweet spot” that suggests it’s about right, meaning most new truck orders will be for replacement purposes.

Freight rates, according to Starks, have been trending up in the US since the new hours-of-service rules went into effect in July. He predicted rate increases will be seen throughout 2014.

However, despite all the positive indicators, Starks said November’s Class 8 orders were a disappointment, coming in at 20,900 units in what is traditionally a strong month. November’s orders were about 5,000 lower than October’s, and “normally November is one of the strongest months of the year,” Starks said. “It doesn’t give me a whole lot of confidence to say there’s a huge pent-up demand in the system.”

Looking at the medium-duty truck market, Jon Starks, director of transportation analysis with FTR, said the forecaster is making a significant reduction to its outlook for 2014-2015. The three-month moving average for medium-duty truck orders has been fairly stable since the beginning of 2011, Starks noted.

Still, the forecaster has downgraded its expectations for US Classes 4/5 trucks from 85,000 units in 2014 to 77,000 units. For Classes 6-7 trucks, it dialed down expectations from 110,000 units to 107,000.

Don Ake, vice-president of commercial vehicles for FTR, and the newest member of its team, said the trailer market will remain fairly consistent over the next year. Trailer demand has been very stable through 2012 and 2013, he noted, and that should continue into next year.

“In 2014, the trailer market should have quarterly patterns very similar to 2013, unless there is significant growth in the economy,” he explained.

FTR is projecting trailer build for 2014 to come in at about 237,400 units, slightly ahead of the 235,000 units that the industry is on pace to build this year.

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