(Bloomberg) -- Orders for semi trucks are rebounding after an almost two-year long slump, a positive sign for a U.S. economy that's having growth crimped by sluggish passenger-car sales.
Preliminary net orders for Class 8 trucks -- which weigh in at more than 33,000 pounds -- surged 81 percent in July, the biggest monthly jump in almost three years, according to ACT Research. Demand has been perking up after a 20-month streak of shrinking orders ended in November.
The recovery for 18-wheelers contrasts with car and light truck sales in the U.S., which have dropped each month this year and plunged in July by the most since August 2010, a year after the federal government's “Cash for Clunkers” program came to an end. The truck orders are signaling confidence in growth that's being supported by steady consumer and business demand.
“The North America economy is picking up,” said Bloomberg Intelligence analyst Karen Ubelhart. “Truck orders are a pretty good indicator.”
Truck utilization -- a measure of how many of their trucks companies are using at a particular time -- has been at about 99 percent, meaning new semis are needed to maintain delivery rates, Ubelhart said. Growth in housing and residential construction, plus increasing consumer purchases, are contributing to greater demand for the goods that Class 8 trucks transport.
Several companies that make semi-truck engines and parts saw a boost in the second quarter from increasing demand. Meritor Inc., which manufactures parts for engines, transmissions and brakes, reported earnings Wednesday that beat analysts' estimates and increased its full-year revenue forecast to $3.25 billion.
Meritor, Cummins
Meritor's commercial truck and industrial sales for the quarter climbed 14 percent to $728 million, driven by higher Class 8 truck production in North America.
“As we look longer term at the U.S. economy and its health, we see no reason that the Class 8 market shouldn't be able to sustain that replacement demand level going forward,” Chief Executive Officer Jeffrey Craig said on a conference call.
Higher demand for trucks and construction equipment in North America and China contributed to engine maker Cummins Inc.'s 12 percent jump in revenue in the second quarter. The company now expects annual sales to be 9 percent to 11 percent higher than last year, up from a previous range of 4 percent to 7 percent.
Class 8 truck orders at Navistar International Corp. were up 32 percent in July from the previous year, according to Jeff Sass, vice president of sales and marketing. He said higher levels of residential construction contributed to the increase.
“There's a lot of commerce going on right now in the marketplace, and that's driving truck demand,” he said.
To contact the reporter on this story: Claire Ballentine in Southfield at cballentine@bloomberg.net.
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, David Welch
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