Data on truck orders, global air freight add to the unsettling stew of economic malaise

Data released today from transport sectors as disparate as U.S. heavy-duty trucking and international air freight have offered up more evidence of a dreary 2016 for companies that ship goods, and for those who make the equipment needed to ship them.

According to preliminary data from consultancy FTR, net orders in April for new Class 8 tractors skidded to 13,500 units, the fourth consecutive monthly decline, a 16-percent drop from a weak March, and the worst April showing since 2009, around the depths of the Great Recession. Year-over-year net orders—defined as new orders minus cancellations—plunged 39 percent in April, according to FTR data.

FTR said that based on the data from the past three months, Class 8 orders will come in at an annualized rate of only 190,000 units, a very low figure. The annualized order rate for the past 12-month period is 237,000 units.

FTR executives were not expecting a robust April. However, they were taken aback by the magnitude of the weakness. "It looked like the market was going to stabilize, but this order volume is surprisingly low," said Don Ake, the company's vice president of commercial vehicles. "Fleets have right-sized for the current freight volumes and do not need additional units. They are being very cautious to not overextend until business improves some."

Order backlogs are quickly shrinking and are soon expected to fall to 2014 levels, according to Ake. With the truck-manufacturing industry heading into the seasonally slow summer period, order activity will likely get worse before it gets better, he said.

Meanwhile, the International Air Transport Association (IATA) said its member airlines reported global freight volumes in March fell 2 percent from March 2015 figures. Traffic in the Asia-Pacific region, the world's largest airfreight market with a near 39-percent share, dropped 5.2 percent year-over-year, IATA said. The airline trade group chalked up part of the decline in Asia to tough comparisons with March 2015, when demand for airfreight services rose in the immediate aftermath of the U.S. West Coast seaport slowdown that crippled port throughput and forced businesses to shift more of their deliveries to air. However, port activity has rebounded strongly, an indication that business that shifted to air during the crisis has migrated back. Meanwhile, global demand for Asian air exports remains weak, with many firms in emerging Asian nations struggling to find sustainable markets for their goods, IATA said.

The situation is a bit better in North America and Europe, which, combined, account for 43 percent of global volumes. Traffic carried by North American airlines fell 1.3 percent year-over-year, while hauls by European airlines rose 2.3 percent, IATA said. Of the six regions IATA tracks, only Europe and the Middle East posted year-over-year increases in volumes. Traffic is measured in revenue ton-kilometers, defined as one revenue ton flown one kilometer.

Amplifying the profit challenges for freight haulage is an increase in available capacity, which depresses selling prices due to oversupply. In March, available freight ton-kilometers, which measure the amount of space available to load cargo, rose nearly 7 percent year-over-year, IATA said. All regions reported increases in capacity, paced by African airlines, which reported a 22.6-percent rise on the back of expanded long-haul route operations.

The international airfreight industry has been mired in a 15-year slog due to a number of factors that have conspired to mute demand. Chief among them has been a roller-coaster global economy that has tempered demand for premium-priced air commerce and compelled shippers to convert some of their shipments to lower-priced sea freight services.

Today, airfreight demand is largely confined to surges that support the rollouts of technology products that need to get to market quickly; seasonal holiday ordering; and extraordinary events such as the West Coast port slowdown that left many businesses with no transoceanic shipping services.

IATA, which has taken a decidedly dour view toward the industry, didn't deviate in releasing the March results. "It is shaping up to be another tough year for air cargo," said Tony Tyler, the group's director general and CEO.

The numbers from FTR and IATA come amid growing concern that demand and pricing for truckload, less-than-truckload, railcar loadings, and intermodal services will stagnate for the rest of the year as industrial production remains subpar, retail sales weaken, and a dramatic slowdown in shale oil and gas exploration hurt rail and truck activity.