If the economic recovery is slowing, why are truck sales breaking speed limits?
ACT Research projects heavy truck sales will rise 26 percent in 2010 after plummeting during the 2009 recession. Net Class 8 truck orders were up 84 percent in May from a year earlier, while trailer orders jumped 59 percent year-over-year.
"For the third consecutive month, the Class 8 data were solid from top to bottom in May," said Kenny Vieth, partner and senior analyst with ACT Research.
At the same time, indices measuring freight demand began to flag, with TransCore's North American Freight Index slipping 3.2 percent in May and 11 percent in June.
Morgan Stanley's Truckload Freight Index, which measures demand against supply, has been falling since hitting its peak May 14, dropping 16 percent by July 9.
Freight demand and spot market rates are still way above year-ago levels, but their tapering in recent weeks and months indicates a recovery in downshift.
Did anyone tell J.B. Hunt Transport Services? In May, the intermodal and truckload carrier ordered 5,000 Class 8 tractors, to be delivered over the next five years.
In June, less-than-truckload giant Con-way Freight ordered 1,300 Class 8 tractors, spending about $100 million on high-tech tractors packed with safety options. Stevens Transport, Heartland Express and Chrysler Transport Group are among the companies whose orders are keeping truck production lines in business.
Why the surge in sales? Do truckers know something the economists are missing?
Not really. The purchasing spree may seem counterintuitive, but there's a good reason those companies are adding big iron; they're retiring a lot of old rust.
Most of the trucks being purchased are replacement vehicles -- carriers aren't so much expanding their fleets as sprucing them up with newer equipment. For example, Chrysler Transport Group is purchasing 325 Class 8 tractors to replace aging trucks it hung onto through the recession and Chrysler's bankruptcy.
And trucking isn't the only industry out shopping. In the first five months of the year, business orders for equipment and other capital goods rose 15.5 percent. Corporations recovered from the recession well before consumers, as earnings for the Fortune 500 skyrocketed in 2009 after they eliminated 821,000 jobs.
In addition to heavy equipment such as trucks, diesel engines and mining machines, businesses are buying technology -- pushing up orders for computers and networking equipment 2.5 percent in May, according to the Commerce Department.
Intel on Thursday reported a 4.3 percent sequential quarterly increase in sales to $10.8 billion, backed by strong corporate demand for microprocessors.
After all, computers, like trucks, are used to deliver a service. Just without wheels.
-- Contact William B. Cassidy at firstname.lastname@example.org.