SONAR Indices & Insights: Get a Sense of Economic Activity or Indication of Freight Capacity with ACT Research Truck and Trailer Orders (ORDERS)

Adam RobinsonFreight Market Blog

Each week, you’ll learn about another index found within SONAR, the freight forecasting platform from FreightWaves. This week the ACT Research Truck and Trailer Orders (ORDERS) index is highlighted. This index allows SONAR subscribers to view truck and trailer order data. This index is a monthly series on the number of heavy trucks and trailer orders in the U.S. economy, providing freight market participants leading indications into the activity around the U.S. freight economy and insights into the state of freight capacity. Read further to learn what the ORDERS index is and how combining this index with other SONAR indices provides a more proactive approach for freight market parties to plan for trucking capacity, or lack thereof, as well as where freight rates are headed on the trucking spot rates freight market.

What is the ACT Research Truck and Trailer Orders (ORDERS) Index?

The ORDERS index displays the truck and trailer order data in a monthly series of the number of heavy truck and trailer orders in the U.S. economy. The data sets are not seasonally adjusted and are expressed in the number of units for the month. The following granularities are available in SONAR:

  • ORDERS.CL5 – Class 5 Trucks
  • ORDERS.CL67 – Class 6 & 7 Trucks
  • ORDERS.CL8 – Class 8 Trucks
  • ORDERS.FLAT – Flatbed trailers
  • ORDERS.RFR – Reefer trailers
  • ORDERS.Van – Dry van trailers

Truck and trailer orders are a measure of trucking industry health and carrier sentiment, as carriers typically invest in new trucks and trailers when demand and optimism are high. Equipment orders typically tie closely with spot rates in the trucking industry.

truck and trailer orders index

SONAR Ticker: ORDERS.VAN, ORDERS.CL8

How ORDERS allows participants to gain freight capacity and economic activity insights

“This fall, I expect the impact of the currently high truckload spot rates as well as pent-up demand for equipment to contribute to a robust (van trailer) order season to handle a need in freight capacity,” FreightWaves equipment market expert Mike Baudendistel wrote in an August 2020 FreightWaves article.

Great Dane, the fourth-largest trailer builder, said COVID-related historic lows in April and May of 2020 led to confidence in placing orders for a strong holiday season lasting into 2021.

“That’s exactly what has occurred,” Great Dane executive vice president of sales Chris Hammond told FreightWaves. “We are optimistic that 2021 will be a bigger build year in all the major segments we serve as our customers are seeing shipping rates increase.”

Using the ORDERS data, a SONAR subscriber is able to understand the number of truck and trailer orders with granularity. Growth in trailer orders may suggest carriers are more willing to drop empty and loaded trailers at shippers and their consignees instead of waiting at their facilities, an indication that current freight capacity is scarce. Normally, the carrier would pick up a loaded trailer after placing the empty one — called a drop and hook. It is a more efficient operational practice if the carrier has the trailers to spare because it leads to fewer wait times that drain driver productivity. This is also good for social distancing, which may also be contributing to the trailer pool growth. 

Trucking companies have also been dealing with recruiting issues over the past several years. Driver schools were shut down earlier in the year and the Federal Motor Carrier Safety Administration’s new drug and alcohol clearinghouse went into effect, making it harder to find qualified drivers as demand rose rapidly throughout the summer. If carriers can manage their trailer pools effectively and shippers have the space to manage large trailer staging areas, they will be able to manage more freight with less personnel and freight capacity.  

The truck and trailer industry “is pretty representative of heavy-duty manufacturing in the country,” Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence, told FreightWaves. “[They] are leading indicators for the economy and all that news is good. But there is still uncertainty.” 

How to use the ORDERS Index with other SONAR charts and what it tells freight market participants

Use ORDERS with the Outbound Tender Reject Index (OTRI) to see the correlation of how an increase in truck and trailer orders and a high OTRI indicates tight freight capacity and carriers’ response. 

Let’s look at the most recent ORDERS indices with OTRI. Tender rejection rates continue to hover around all-time highs as carriers struggle to cover the recent freight boom, driving rates and revenues higher. The last time this occurred carriers rushed to purchase record amounts of equipment in 2018. But this time around, trailers are the equipment of choice over tractors.

truck and trailer orders with OTRI

Preliminary trailer orders for September 2020 look to be the third-highest month in history, exploding to 52,000 units. This is part of a five-month trend of increasing dry van trailer orders that began in May of this year. 

Class 8 tractor orders have also been on the rise but stalled in August as they dropped 4% off July numbers (but were still 75% higher than the previous year). Preliminary reports have September 2020 tractor orders back on the rise again at around 32,000 units, which would be the highest level since October 2019. The interesting aspect of this is just how fast trailer orders are growing in relation to tractors. 

Keep ahead of the freight market and turn to SONAR to track truck and trailer orders and plan around freight capacity

In uncertain times, freight market participants need certainty to stay ahead of the freight market and understand the freight demand occurring in each participant’s most important lanes. The premier freight forecasting engine, FreightWaves SONAR, allows participants to benchmark, analyze, monitor and forecast freight demand and costs.  SONAR ensures more proactive responses to the market, the ability to provide a solid customer experience by offering transparency, as well as make faster, more informed decisions. Get a demo of SONAR to see what the platform can do for you.