The North American trucking market is experiencing a revival and renewed demand, driven by a surge in vocational truck orders, improved freight rates, and stronger utilization. FTR's Trucking Conditions Index rose from -2.47 in September to 0.49 in October, indicating improved conditions for carriers. Vocational truck orders have seen significant increases, with 20,000 units in September and 9,500 units in October, as fleets prepare for EPA27 emissions regulations and infrastructure projects continue. While spot rates have declined due to seasonal trends, the overall market outlook suggests a positive path for 2025 and 2026, with more details on this trend available.
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Key Takeaways
- FTR's Trucking Conditions Index improved to 0.49 in October, indicating a more balanced market with stronger utilization and lower capital costs.
- Vocational truck demand surged due to US industrial policy and infrastructure spending, with heavy orders in September and October.
- Trailer orders rose 34% month-over-month in October but were down 52% year-over-year, reflecting fleets prioritizing power units over trailers.
- A modest increase in freight rates is anticipated, potentially disappointing both carriers and shippers, with tightened capacity assumptions based on preliminary employment data.
- The trucking market is expected to see consistent positive conditions by the second quarter of 2025, extending into 2026, despite a slightly weaker freight volume forecast.
Trucking Conditions Improve
How are trucking conditions changing in the current market environment?
The FTR Trucking Conditions Index has shown significant improvement, rising from -2.47 in September to 0.49 in October. This positive shift is attributed to stronger utilization, lower capital costs, and less challenging freight rates.
The forecast for freight volume next year is slightly weaker, but capacity assumptions have been tightened based on preliminary government data regarding trucking employment. A modest increase in freight rates is anticipated, which might be just strong enough to disappoint both carriers and shippers.
The index is projected to maintain positivity consistently in the second quarter of 2025 through at least 2026, indicating a more balanced market for carriers.
Trailer Orders Rebound
Trailer orders have experienced a significant rebound, with November figures showing a 21.3% increase, totaling 20,500 units, and marking a 4% year-over-year decline.
This uptick is attributed to the traditional start of the order season, with increased quotation activity observed in the past few months.
Despite the year-over-year decline, the month-over-month increase is seen as a positive indicator.
The backlog expanded by almost 11% sequentially in November, as order intake outpaced build by about 6,700 units.
Industry experts remain cautious, emphasizing that one data point does not make a trend and that the stickiness of this trend will be determined as more data arrive in the coming months.
Vocational Truck Demand Rises
Driven by strong US industrial policy and infrastructure spending, the vocational truck segment is experiencing a surge in demand. Approximately 40% of the $2 trillion stimulus funds from 2021-2022 are still in play, enhancing demand for vocational trucks.
This has led to increased preparedness among vocational truck buyers to refresh their fleets ahead of the EPA27 emissions regulations. Heavy vocational truck orders were 20,000 in September and 9,500 in October, indicating a positive outlook for the segment.
Stable production is anticipated for vocational trucks moving into 2025, as buyers aim to modernize their fleets to comply with upcoming regulations and capitalize on ongoing infrastructure projects. This trend is expected to continue, supporting the vocational truck market's revival.
Spot Rates Experience Decline
Spot market rates have recently experienced a decline, influenced by seasonal factors typical of this time of year. The week ending December 13 saw a drop in rates across various segments, with reefer rates being the most affected. Dry van rates, however, showed the smallest decline since 2008.
Key points about the recent decline in spot market rates include:
- Seasonal Impact: Rates typically drop in the week before Christmas.
- Segment Variations: Reefer rates saw the largest decline, while dry van rates had the smallest decrease.
- Load Postings: A decline in load postings combined with increased truck postings led to a drop in the Market Demand Index to 62.9.
- Market Demand Index: Despite the recent decline, the index remains the highest in over a month.
- Future Expectations: Further decreases in rates are anticipated due to seasonal trends.
Market Outlook and Projections
Key factors influencing this outlook include a slightly weaker freight volume forecast for next year and tightened capacity assumptions based on preliminary government data.
Additionally, a modest increase in freight rates is anticipated, which may cause disappointment for both carriers and shippers.
Conclusion
The trucking market is experiencing a revival, marked by improved conditions and renewed demand. Key indicators, including FTR's Trucking Conditions Index and trailer orders, show positive trends. The vocational truck segment is also seeing an upswing, driven by US industrial policy and infrastructure spending. Despite declining spot rates, the industry's outlook remains cautiously optimistic, with potential for further growth and stability in the coming year. Market adjustments are leading to a more balanced interaction between carriers and shippers.