In a worrying sign for the health of the economy, Class 8 truck orders have plummeted so far in 2019. While some drop was expected given the record demand in 2018, the size of the fall has taken many observers aback. Year-on-year drops were 43% in December, 68% in January, 58% in February, 66% in March, and 57% in April. That’s not just a drop, that’s a bloodbath.
Class 8 trucks are those that weigh above 33,000 pounds, which includes big 18-wheelers. As anyone who has done any amount of highway driving understands, 18-wheelers are the backbone of the American economy. Nearly 70 percent of the goods transported within the United States are transported by truck. So does this collapse in orders for heavy trucks portend a major drop in shipping volume?
Many trucking analysts contend that there is an existing backlog of orders for class 8 trucks, prompting many trucking companies to pull back on orders for their fleets while they take delivery of trucks they’ve already ordered. But all indicators seem to point to last year as a major and unsustainable boom in truck orders. Now we’re seeing that bubble burst.
As economic activity such as manufacturing slows down, and as agricultural production decreases this year as a result of bad weather and flooding, it will be interesting to see how that affects future truck orders. If year-on-year sales remain flat going into early next year then perhaps we might be able to say that the current rout is just the natural reaction to last year’s record sales.
But if year-on-year sales continue to show losses come December, January, etc. then we can be pretty sure that it’s not just a one-off occurrence. Trucking sales may very well be the canary in the coal mine that indicates that we’re just starting to see the first effects of the economic slowdown that will ultimately turn into another recession.