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Heavy Truck Orders Continue to Collapse

by Richard A Reagan

Analysts looking for more signs of a struggling economy are viewing the US trucking market with trepidation. Heavy truck sales in the US continue to collapse at an astonishing rate. While some downturn was expected, given high sales last year, the rate of collapse is shocking, with sales coming in under even the lowest analyst expectations.

To a certain extent there is some cyclical nature to the US trucking market, and swings in sales don’t always correlate to the overall business cycle. But the nature of this collapse and the extent of it could very well be a harbinger of a worsening economy. Class 8 truck sales in August dropped nearly 80 percent year over year, the 10th straight month of declining sales. Trailer sales dropped too, as did sales of Class 5-7 trucks.

That’s an indicator that trucking companies are seeing a significant decrease in business and thus either don’t need to replace worn out equipment or don’t need to buy new equipment to expand their operations. Just as with other shipping indicators such as the Baltic Dry Index, economic indicators such as these are viewed as proxies for economic activity.

They’re leading indicators that aren’t necessarily reflected in larger aggregates such as GDP, and are largely ignored in many economic surveys, but they’re important indicators nonetheless. And truck orders show no signs of improving anytime soon, which is a very worrying sign for the economy.

The US economy runs on trucking, as without trucks delivering goods on a regular basis most store shelves would go bare within about three days. That’s the nature of our just-in-time inventory system, in which stores look to minimize their inventory in order to minimize storage expense. Therefore, as the trucking industry goes, so goes the rest of the economy. Keep an eye on truck sales in the future, as they could be indicating a complete implosion of the US economy.

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