Weak freight fundamentals could shorten Class 8 order peak

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Class 8 truck orders hit a 2023 high last month, but ACT Research cautioned Wednesday that the freight market fundamentals that inform the market "are still flatlining" in releasing its most recent North American Commercial Vehicle Outlook report.

“Freight markets have not improved as we have trekked through the second half of 2023, with no demand-side relief to date, even as strong Class 8 tractor sales have continued to add to the supply side of the equation,” says Kenny Vieth, ACT’s president and senior analyst. “In the short term, one of the things staying our hand from deeper forecast cuts in the face of weak freight fundamentals and falling carrier revenues and profitability has been a solid industry-wide start to ‘order season.’”

Starting around the last trimester of the year, ACT says this is the period in which the OEMs open their out-year order books, leading to a period of outsized orders that typically extends into March. This elevated seasonality is one reason why ACT typically emphasize seasonally adjusted figures in its analysis of month-to-month data, the company says.

[RELATED: Rush expects pullback for market in 2024]

“Looking to 2024, we note that ‘order season’ typically stretches through the first quarter. While orders have been strong season to date, weak freight fundamentals are expected to limit the duration of this year’s peak order season," says Vieth. "Looking forward, we would note that December is typically the strongest month of the year for Class 8 and nearly the strongest for trailers: Seasonality alone suggests a big number to end the year. Q1 is historically weaker for orders than Q4.”

ACT Research also states it believes a number of “it’s different this time” factors are at work in 2024, and those factors will help support broader Class 8 demand around a fundamentally weak U.S. and Canadian tractor markets. Those factors include ongoing pent-up vocational truck demand, strong tractor demand in Mexico, a healthy domestic LTL market, and issues surrounding supply chain integrity, the company adds.

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