It is commonly understood by economists that the state of the trucking industry in America reflects the state of the overall economy. Why? Because 70% to 80% of the freight we move completes at least part of its journey by truck. Trucking is the most cost-effective way to move freight. Therefore, a robust trucking industry is a sign that the economy is doing well. In light of that, economists sometimes look at new truck orders in an attempt to forecast what things will look like in the coming year.
Some economists were concerned because new truck orders were off in January (2016). According to Bloomberg, year-on-year sales were down some 48% as compared to the previous year. It did however raise the question whether or not falling new truck orders are a key indicator of the trucking industry. We don’t think so, as there are a variety of reasons that help the trucking industry.
Freight Volume Is More Important
The first thing to understand is that, freight volume is a much more reliable indicator than new truck sales. The more disposable income consumers have, the more money they spend on buying things. This results in higher inventory levels at distribution centers and warehouses and in turn increases the volume of freight being moved closer to the consumer.
Due to this fact, what we should consider is whether or not trucking companies are still moving the same volume year-on-year, combined with forecasts for economic growth. According to Bloomberg, economic expansion for 2016 should be slightly more than 2%. The trucking industry should be able to absorb such a modest amount of growth without substantial investments in new equipment.
As long as truckers are still moving the same volume of freight, the situation is fine. Falling new truck orders do not necessarily translate into lower volume any more than falling profits for diesel fuel makers.
Another reason to be optimistic despite fewer new truck orders can be found in shifting logistics. We have noticed a trend beginning to emerge involving trucking companies and shippers relying more on regional distribution rather than coast-to-coast freight forwarding. Moving to a regional model reduces travel time between destinations, keeps truckers closer to home, and makes logistics more flexible in adapting to a quickly evolving on-demand marketplace.
What does all this mean to truck manufacturers? It means fewer orders. Trucking companies that rely more on a regional distribution model do not need to invest as much equipment on an annual basis. Equipment lasts longer under this model, and replacement schedules can be adjusted accordingly.
Constant Economic Cycles
The US economy is no different than any other major world economy undergoes similar economic cycles. Some economists concerned about falling new truck sales point to a 2014 surge that saw near record numbers of new trucks manufactured and sold. What they may have not accounted for are new equipment purchases made by companies emerging from the last recession. Those same companies might not be replacing equipment as aggressively.
The cyclical nature of any economy dictates that there are ebbs and flows in nearly every industry. Truck manufacturing is not unique in that sense. Economists who might be concerned need only look at the outlooks of each of the major manufacturers who supply the trucks both domestically and abroad. None of them are panicking, so there is no need to be concerned.
As an existing truck driver, the ordering of new trucks doesn’t mean more road time and translates to more higher wager. In fact, well planned logistics result in improved driving schedules and the ability to choose better route options, both, for the driver and the load being transported. That being said, if you are conscious of your trucking gear and truck tarps, a look through our complete inventory of flatbed truck tarps, truck tires, cargo control equipment, and other accessories you would need for the coming year and change in seasons.
- Bloomberg – http://www.bloomberg.com/gadfly/articles/2016-02-08/truckmakers-skid-doesn-t-mean-recession