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This story appears in the July 14 print edition of Transport Topics.

New Class 8 truck orders jumped 41.3% in June from a year earlier as fleets continued to invest in new equipment to better meet rising freight demand, ACT Research reported.

North American original equipment manufacturers booked about 26,600 net orders last month, compared with 18,831 in June 2013, according to the firm’s preliminary data.

June’s total also edged up 1.9% from the 26,115 orders recorded in May.

“It’s an increase in underlying demand that’s driving orders,” ACT Vice President Steve Tam said. “Clearly, expectations are for solid economic growth this year and even better growth in the trucking-related portion of the economy.”

That improvement in the freight market is apparent in tonnage growth and freight rate increases, he said.

“There’s just a really nice growth trend taking place right now,” Tam said. “I think it’s a path we’re going to be on for a while.”

Trucking firms continue to position themselves to take advantage of the increase in demand, mostly by replacing their older equipment but also through fleet expansion in some cases.

However, Tam said the “nascent” trend toward expansion still is limited to specific markets and customers, rather than being an industrywide movement.

He said June’s elevated total was “very uncharacteristic” for that time of year, when order activity usually begins to wane.

Last month’s tally was the highest for June since 2005.

“We are pleased with June’s higher-than-average performance and cautiously optimistic that the industry will not experience a deep summer slowdown like we have seen the last few years,” said David Hames, general manager of marketing and strategy at Daimler Trucks North America, which sells Freightliner and Western Star trucks.

He predicted that fleets will continue to replace their aging trucks with new, more efficient models.

Navistar International Corp. CEO Troy Clarke said the North American truck market this year now looks better than he thought it would be in January, and he expects even more growth in truck sales at least through 2015.

“We always look at manufacturing indexes. All indicators now are kind of pointing in the right direction. . . . Good things

are happening,” Clarke said during a July 9 interview with Transport Topics editors and reporters.

Navistar’s large accounts are performing at or above the company’s expectations, but dealership sales haven’t sprung back as much, he said. “Some dealerships are killing it, but others are still trying to gain traction.”

Clarke said Navistar’s severe-service and vocational business has not been as good as he would like.

He said a long-term congressional commitment to road building would be extremely beneficial for sales in this area, with immediate effect.

The industry has seen “very strong” growth throughout the first half of 2014, with orders climbing 27.8% to 168,799, from 132,123 in the first half of 2013, ACT’s Tam said.

“I think it has taken the industry somewhat by surprise,” he said. “The OEMs are catching up to it. As the year has progressed, we’ve seen them increase their build plans to accommodate customer requests.”

Net orders have surpassed the 24,000 mark and have risen from year-ago levels in each month so far this year.

June’s year-over-year growth rate was the industry’s strongest since a 50.8% jump in January.

Preliminary June data from the transportation consulting firm FTR showed similar results, with Class 8 net orders jumping 41% year-over-year to 26,255 units.

“June’s numbers are significant, especially considering that order activity typically slows when summer starts,” FTR Vice President Don Ake said. “It wouldn’t have been surprising to see Class 8 orders under 20,000 units for June, so a 26,000 level is outstanding.”

Industry analysts said strong freight demand and higher rates are fueling the growth in new orders.

“Monthly order trends have been positive, and we are firmly in the camp that the North America commercial vehicle recovery has sustained momentum,” said Lawrence De Maria of William Blair & Co. “In fact, if it were not for the driver shortage, we believe demand would be even higher.”

J.P. Morgan analyst Ann Duignan also pointed to the relatively old age of the North American truck fleet, Navistar’s increased market presence, the return of large fleets to the market and some fleet expansion as key factors supporting the recent growth in equipment demand.

Rhem Wood of BB&T Capital Markets said it’s not unusual for order levels to decline to the 16,000-to-18,000 range during the summer months, but that hasn’t happened yet in 2014.

“Obviously, this year has turned out to be abnormally strong thus far,” he said.

Industrywide backlogs stood at about 118,600 units at the end of May and likely expanded by about 1,400 during June, which would put the industry at its highest backlog level since February 2012, ACT’s Tam said.

Associate News Editor Jonathan S. Reiskin contributed to this story from Washington.

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