After four months of decline, North American Class 8 truck orders took a modest upturn in May. Order activity is not where many hoped it would be at this point in the recovery, but analysts say the industry is still relatively healthy.
May Class 8 truck net orders numbered 17,650 units, according to preliminary data from FTR Associates, with ACT Associates predicting the final number will approach 18,000 units when it's available mid-month.
May orders were only up 5% from a weak April and down 24% from the same month last year, FTR notes. The annualized order numbers for the past three month period, including May, now calculate to 216,700 units. This is significantly lower than the activity seen in the December through February timeframe, when order activity was running at a 308,000 annualized rate.
"The net orders for May were in-line with our modest expectations," says Eric Starks, FTR president. "Unfortunately, it is well below where many in the industry were expecting to be at this point in time in the recovery.
"The ongoing weakness is putting additional pressure on the OEMs to lower their build rates over the next several months. With orders hovering near 17,000 units per month and production near 25,000 units per month, it is clear there is a disconnect. A dramatic increase in order activity is needed in order for the OEMs to continue production at their current pace."
FTR predicts orders to stay near current levels over the next few months, as the summer is traditionally a slower time of the year for order activity.
However, Starks says, "It is important to note that even with the recent slowing in order activity, the levels are still relatively healthy for the industry."
Medium-duty numbers were also disappointing, according to ACT Research. Its analysts predict the final May numbers will approach 13,100 for medium-duty Class 5-7 vehicles, which is down from April.
"As has been the case the past two months, the issue appears to center on credit-buying truckers' confidence in the economy relative to the risk of taking out a sizeable loan," says Kenny Vieth, president and senior analyst, ACT Research.
"Highlighting the notion that the recent pullback in orders is a confidence rather than freight related issue, cancellations in recent months have remained at low levels.
"Beyond confidence, the demand check boxes remain positive, suggesting that the pull-back is temporary," Vieth says. Like FTR, however, he notes that July and August are typically the softest order months of the year, so numbers aren't likely to increase significantly until back-to-school time.