Replacements will continue to drive truck demand

Jason Cannon December 12, 2013

ftrEric Starks Senior Consultant and President of FTR Associates says if truckers don’t have freight, they don’t need equipment.

Current trends in the market, according to FTR, show a steady demand for new equipment for the foreseeable future.

The Institute for Supply Management (ISM) manufacturing index has been above the 50 benchmark for the last six months, and its November rating is the highest since April 2011.

“Any reading above 50, (the index) is in expansion mode,” Starks says. “The trucking sector is relatively healthy, and trends suggest it will be healthy for the foreseeable future.”

Starks says truck utilization is currently above its historical average of 90 percent, and is trending upward.

Trucks that are in use are making good money, Starks says, adding restrictions due to Hours of Service and a loss of productivity have driven rates upward for the past six months. Starks added he expects rates to continue to increase into 2014.

That’s the good news. The not-so-good news is high truck utilization and a bump in rates aren’t likely to result in a boom in truck sales.

Starks says he expects limited fleet growth in the coming quarters, and truck sales will likely continue to be supported by fleet renewal following a week November.

“(North American Class 8 orders) dropped by about 5,000 units from October,” he says. “I would typically expect to see November as one of the strongest order months of the year as fleets wind up 2013 and look forward and plan for 2014.”

December is typically a strong month for seasonal orders, and Starks said it would be nice to see backlogs start to grow.

Starks noted the backlog to build ratio is blow normal levels and at its lowest point since mid-2012, and it’s trending downward.

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