Alternative Indicators: What Big-Rig Truck Sales Reveal About the U.S. Economy

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Alex Ossola (0:29)

Sometimes, when I'm driving down the highway, it can feel like there's nothing else on the road but these huge trucks.

A lot of them have branding on the side. Retailers like Walmart or Amazon or shipping companies like UPS. But most big trucks whizzing by don't give much indication at all about what's inside. These big rigs aren't just carrying clothes and appliances and toilet paper. They're carrying the raw materials and components for these and other products. Basically, if it needs to be moved around within the US, it's probably being moved by truck. Most companies hire trucking companies to do that shipping. And those trucking companies need big enough fleets to meet demand. So you could see how sales of these heavy trucks could be a sign of how much companies need to ship, and so how much the economy is buzzing.

Bob Tita (1:25)

It's an indicator certainly of freight activity, and freight activity is an indicator of the sort of general economy.

Alex Ossola (1:32)

That's my colleague Bob Tita, who covers manufacturing for the journal. Historically, the data do what Bob says, all the way back to the 1960s. Declines in heavy truck sales often match up to economic contractions. And right now, truck sales aren't looking great. Data from the Bureau of Economic Analysis shows that, in August of this year, the most recent month data is available thanks to the recent government shutdown, heavy truck sales fell almost 20% from the year before, hitting their lowest point since July 2020 More recently, the companies that produce the trucks say their sales are sliding. Daimler Truck, the biggest heavy truck maker in the US by market share, said its North American third quarter sales fell about 40%. Packer, the second biggest, said its truck sales in the US and Canada during the same period were down 34% from a year earlier. So does this spell bad news for the broader economy? Or are other factors complicating this picture? This is a special episode of What's News. I'm Alex Ossola for The Wall Street Journal. This is the third episode of our series on alternative economic indicators. In our first two episodes, we discussed what Nevada's employment rate and the price of copper are telling us about different aspects of the US economy. Today we're turning to heavy truck sales as a gauge of the US manufacturing sector and of the economy at large. To learn more, I first started by sitting down with my colleague Bob Tita.

So we're talking today about heavy trucks. Had you heard of heavy truck orders or sales as an economic indicator before?

Bob Tita (3:16)

Sure. It's an indicator certainly of freight activity, and freight activity is an indicator of the sort of general economy when more things are being shipped. Generally, that means more things are being bought and consumed. So there certainly is a relationship.

Alex Ossola (3:32)

And is the converse also true that when there's a decline in heavy truck sales or orders, then there's a decline in manufacturing output and freight activity?

Bob Tita (3:41)

Generally, yes, that's certainly true. And we have seen that in recent months, certainly, when we've had some pretty weak manufacturing activity, and that's been reflected in demand for trucks and truck services.

Alex Ossola (3:55)

Right. There are two different numbers here that have sort of come up in my reporting, truck sales and truck orders. Can you just break down what each of those means and how that tracks to the broader US economy?

Bob Tita (4:07)

Truck sales are generally end users, and truck orders are generally what those end users do. When they buy trucks, you order them. So a lot of what actually gets tracked very closely are truck orders because it's an indication of truck sales. Trucking companies generally don't buy trucks until they see freight rates and demand for freight services going up. So a trucking company typically wouldn't buy more trucks because they think they're going to have more business six months from now. They generally buy trucks in an improving or a stronger market. Although lately, truck orders have been very weak, and there's inventories and dealers of unsold trucks. So there's high inventory, which is also an indication of weak sales. So orders have been down and inventories have been high.