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January Class 8 orders drop to lowest point since 2016

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After a year of record-breaking orders, Class 8 orders for January fell to their lowest point since October of 2016, according to preliminary numbers from ACT Research and FTR.

FTR reports that preliminary North American Class 8 orders for January 2019 dropped 26% month-over-month to the lowest since October 2016 at 15,600 units. This year’s January order activity was down 67% versus last year and is the worst for the month since 2010. According to FTR, the low Class 8 order number was not entirely unexpected, as the great majority of fleets already have all their orders in for 2019 and don’t need to place any more orders for a while. Backlogs are expected to fall, but should remain over 70% higher than a year ago. Class 8 orders for the past 12 months have now totaled 402,000 units.

“Orders had to fall below 20,000 units at some point,” said Don Ake, FTR vice president of commercial vehicles. “There were record-breaking orders placed last July and August, and this is the payback for that volume. Even with the weak January numbers, over 330,000 trucks have been ordered in the last nine months, so demand for trucks in 2019 remains strong.

“This is more of a resting point than a turning point. There is an enormous amount of orders in the backlog. The key will be how many of these trucks get built and when. The fundamentals of the economy and freight growth remain solid, so there is no reason to panic. The production rates the first few months of the year will be a better indicator of Class 8 demand than current orders are. We do expect the cancellation rate to remain elevated, as fleets move their orders around in the backlog. Order rates are expected to remain suppressed for a few months, but build rates and retail sales are forecast to climb.”

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According to ACT Research, preliminary North America Class 8 net order data show the industry booked 15,800 units in January, down 26% from December and 68% from January 2018.

“With near-record backlogs in both the medium and heavy-duty vehicle markets, order activity continued to moderate in January. During the month, NA Classes 5-8 vehicle orders fell to an 18-month low 39,200 units,” said Kenny Vieth, ACT’s president and senior analyst. “Regarding Class 8, recall that January 2018 marked the point at which orders went vertical. We view this January’s order softness as having more to do with pulled-forward orders and a very large Class 8 backlog than with the current supply-demand balance. Softening freight growth and strong Class 8 capacity additions suggest that the supply-demand balance will become a story in 2019, but January seems a premature start to that tale.

“NA Classes 5-7 orders rose sequentially to start the year on trend at 23,400 units,” Vieth noted. “Over the last six months of 2018, MD orders averaged 23,300 units per month. While up sequentially, January’s orders had the ignominy of being compared to one of the best order months in history, January 2018, when Classes 5-7 net orders fell 24% year-over-year, the first negative comparison in 16 months.”

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