Heavy truck sales have a strong track record of signaling turning point in the business cycle, and thus, they are one of six components in our business cycle index. As the economy begins to slow, but prior to the onset of a recession, the demand for new heavy trucks begins to decline. The chart below shows heavy weight truck sales and recessions over the last 50 years.
Since 1968, heavy truck sales have peaked, on average, nearly 14 months prior to a recession. The table below shows the first month of each recession, the month in which heavy truck sales peaked, and the lead time in months.
It is worth noting that truck sales in November had declined 7.9% from the peak in September of 2018.
Monthly updates on heavy truck sales are provided by the Bureau of Economic Analysis. Unfortunately, due to the partial government shutdown, the BEA was closed and not releasing data. As a result, we don’t have data on truck sales for the month of December.
This morning, we got a glimpse into the heavy truck market when PACCAR, the manufacturer of Peterbilt and Kenworth trucks reported earnings. Below is an excerpt of what the companies’ CEO, Ron Armstrong, said in their 4thquarter earnings announcement:
“The North American and European economies are projected to continue growing in 2019. Our customers are very profitable and benefiting from strong freight demand. Freight activity grew 6.6% percent in the U.S. in 2018, the highest growth in 20 years. Kenworth and Peterbilt’s 2019 build schedules are substantially full due to the robust orders. We expect 2019 to be another excellent year for PACCAR,” added Armstrong.
Link to the earning announcement: https://www.paccar.com/news/current-news/2019/paccar-achieves-record-annual-revenues-and-net-income/
PACCAR supplies roughly 30% of the trucks in North American so their results are a promising sign that a recession is not imminent. However, we will have to wait for the BEA to release December’s heavy truck sales before we can fully update our Business Cycle Index.
One last point – no one single piece of data has a perfect track record of predicting recessions. Take another look at the chart at the top of this post. Notice that there were several periods where truck sales declined without a recession (1986, 1995, and 2015). No one piece of data is perfect. I would encourage you to not put too much weight on one piece of data. Instead look at the aggregate of numerous data points to draw your conclusions. That’s what our Business Cycle Index does for you.