Big Rig Orders Set First-Half Record, Backlogs Near Highest Rate In Two Decades

June is generally quiet for commercial truck reservations, but this year saw month-over-month growth of 18.5 percent and year-over-year growth beyond 100 percent, according to early counts by ACT Research.

The high tally closed out “the strongest six-month order period that we have in our database, which goes back to 1982,” ACT president Kenny Vieth told the Wall Street Journal.

The bookings have in turn pressed the industry’s order backlog to a 19-year high, by Vieth’s estimates. As of May, the bulk of orders meant June’s reservations won't be filled until February or March of 2019.

What This Means For Businesses

The low supply could be a setback for logistics companies such as Knight-Swift Transportation Holdings Inc KNX, Covenant Transportation Group, Inc. CVTI or J B Hunt Transport Services Inc JBHT, which will be delayed in restocking their fleets.

Yet the companies may be able to capitalize on unmet client demand with margin-driving price increases.

A truck shortage hurts B2B companies looking to expedite shipments ahead of tariffs taking effect: either they lack access to transportation, or they pay a premium to book it.

If there’s any sure beneficiary from the backlog, it’s Class 8 manufacturers like Navistar International Corp NAV, Daimler’s Freightliner Western Star and PACCAR Inc PCAR’s Peterbilt and Kenworth. Suppliers like Allison Transmission Holdings Inc ALSN are also positioned to profit.

Or maybe not.

The 2019 delivery date for new orders means today’s clients will get their new trucks around the same time Tesla Inc TSLA’s semi-autonomous electric Semis roll out. A number of major buyers proactively reserved the Semis, and those now facing a delivery delay may evaluate them as an option.

What This Says About The Economy

The backlog will disrupt the U.S. supply chain, but taken altogether, it’s good news for investors who are long the U.S. economy.

The high freight demand implies increased movement of goods in the U.S. market, which in turn indicates strength in the economy.

“The current level of volume and pricing growth is signaling that the U.S. economy is not only growing, but that the level of growth is expanding,” Cass Information Systems, a processor of freight bills, said in a recent report.

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