The Transportation Recession Spreads, by Wolf Richter

Yet another indication the economy is in a recession that is picking up steam. SLL gives more credence to privately generated economic numbers than to government ones (if you have to ask why, you’re on the wrong site), and the ones cited in this article are doozies. From Wolf Richter at wolfstreet.com:

In January, orders by trucking companies for Class 8 trucks – the big rigs that haul freight on North American highways – plunged 48% from a year ago, to 18,062 units.

The fiasco started in earnest in September. Since then, orders have become “unusually volatile,” as FTR, a transportation analysis and forecast provider, put it in its report. “Unusually volatile” means they are heading south in an unruly manner.

In 2014, orders for Class 8 trucks had reached 376,000 for the year. US truck makers were ecstatic. They cranked up production and hired people. Trucking companies were on cloud nine. Capacity was tight, rates soared. There was talk of driver shortages.

But in 2015, particularly in the last few months of the year, reality was sinking in: oversupply of trucks, weak demand from shippers, and therefore declining spot rates. In response, trucking companies slashed their orders for new equipment. For the year 2015, orders for Class 8 trucks plunged 24.5% to 284,000. “And now,” the report said, “2016 is starting off even weaker.”

The last few months have been crazy. In October, according to FTR, orders for Class 8 trucks plunged 45% year-over-year to 25,000, or a “still impressive” 324,000 orders for the last 12 months.

In November, orders plunged 59% year-over-year to just 16,475, the worst November since 2009. This was “a major disappointment,” FTR explained euphemistically, with “all of the OEMs, except one,” experiencing “unusually low orders for the month.” This brought orders for the past 12 months down to 300,000 units. The report at the time, with a hue of desperation:

The November orders are very concerning. People were optimistic when orders held up well during the summer. Now we get into the peak order season and have the lowest orders of the year. The weak orders are the reason for the recent OEM announcements regarding production cutbacks and layoffs.

Truck inventories are high and retail sales have stalled. The industry would appear to have enough new trucks for now. The manufacturing sector has sputtered and freight growth has slowed. Orders should stabilize soon, but backlogs will be shrinking, necessitating larger production cuts than were previously expected.”

In December, orders plunged 36% year-over-year to 27,800 units, though it was a big jump from November and was “considerably” above the beaten-down expectations. It dragged orders for the 12 months down 24.5% to 284,000 units.

To continue reading: The Transportation Recession Spreads