At the end of September, Bloomberg posted a piece about domestic heavy-truck sales plummeting suddenly. The Bureau of Economic Analysis released a report that showed August of 2016 experiencing a sales drop of 29% when compared with the same period in 2015, which was the weakest month for sales of long-haul trucks in more than three years.

Any time you see a dramatic spike or fall in data like that, one would usually look at an anomaly rather than a trend, however the article goes on to say that heavy-truck sales have, in fact, been declining for two years now.

So why does this matter?

Well, historically, a weakness or decline in the heavy-trucking industry has been an indicator of oncoming recession. Fewer shipment volumes, and weak shipment pricing, are indicators of an economic recession. The strain on the supply chain of maintaining appropriate inventory levels when sales slow increases volatility within the industry, as well.

According to the author, “Weak truck sales have sometimes given false signals about a recession over the last 30-odd years. But the sheer size of this August’s drop looks different. We’ve never seen a plunge this steep that didn’t foretell a recession.”

Paired with other facts in the article, such as: used machinery prices falling by 10% from a year ago, the Cass Freight Index indicating that freight volume and expenditures were down 3.3% from July and 6.3% from August of last year, the picture painted is fairly grim.

However, there are many other facts to keep in mind before drawing any conclusions. For example, increase in efficiency and quality of the trucks themselves can mean heavy-trucks last longer and replacement purchases may decline over time under those circumstances.

Companies may also be holding off on buying new trucks in order to have the capital to jump into upcoming technological advances that are right around the corner in the industry: Nikola Motor Company has unveiled plans for a natural gas and electric powered Class 8 commercial semi that they aim to unveil a working prototype of by the end of 2016, and Uber acquired Otto, a self-driving long-haul truck company, with designs on entering the trucking industry. “In Uber, you press a button and an Uber shows up after three minutes,” Lion Ron, co-founder of Otto, told Reuters. “In freight … the golden standard is that it takes (the broker) five hours of phone calls to find your truck. That’s how efficient the industry is today.” While the self-driving trucks would not drive unmanned just yet, the idea is to become more efficient, cover long distances faster, and allow drivers more rest.

A few other factors in the current climate out of many possible situations that may cause a decline in heavy-truck purchases without signifying an economic downturn include:

  • 2015 saw new requirements on antilock braking systems, which may have artificially boosted sales.
  • Reduced domestic oil production and mining activity can impact heavy-truck demand, which, while being an economic problem to note, are not an overall a harbinger of recession.
  • The prevalence of big data in all industries may be introducing more efficient routes, leading to fewer trips and fewer trucks needed.
  • U.S. exports are down globally, because of the current strength of the dollar, which would lead to reduced demand for domestic transport.

While a drop as dramatic as 29% year-over-year on top of a two year decline is certainly a concern, only time will tell if this drop stands alone, or goes and-in-hand with a recession.