May is here on the calendar, and in Chicago we wish it would show up outside. Every month numbers get reported on previous month’s business activities for the economy in total and for specific industries. April provides the opportunity to look back over the first-quarter performance.
Part of our focus at MacKay & Company is providing an outlook on the aftermarket parts sales for medium- and heavy-duty trucks and trailers. We have a detailed model put together by our team that considers a number of factors including the number of vehicles on the road, their age distribution, and their activity level (miles per year and fleet utilization).
Based on these factors, we determine what service and maintenance requirements these vehicles will likely require for the year and then translate that to actual parts and then to dollars. This model provides a lot of information and a forecast is one portion of that. Our latest forecast for the total 2016 U.S. parts aftermarket is an increase of 1.9 percent, which includes a 2 percent forecast increase for price, so fl at without price.
What have we seen through the first quarter of 2016?
Retail sales of new trucks are forecast to be down in 2016, and were further lowered in the first quarter. Retail sales occasionally get misunderstood in the aftermarket.
Retail sales can be an indication of the health of the economy, but retail sales’ true impact on the aftermarket is not immediate. It takes time for these vehicles to come out of warranty and start needing major service or maintenance activities, and that is when the impact is felt — not the year they are sold.
MacKay & Company has an index of component manufacturers’ sales to the medium- and heavy-duty aftermarket. Collectively, they are down 5 percent year-to-date in the U.S. For most manufacturers, March was significantly better than January and February and we will see if March was a blip or the start of a positive trend. We have some insight on truck manufacturers’ parts sales in the aftermarket; they were fl at in the first quarter compared to last year.
We also have a fleet utilization report (several hundred fleets provide insight on the activity levels of their trucks) that showed mixed results compared to the first quarter of 2015 but up over the fourth quarter. Finally, our measurement of the truck economy (Truckable Economic Activity) is up in the first quarter based on preliminary data.
In total, we see more positive than negative signs for the trucking economy for 2016 (as of this moment, 11:05 a.m. CDT, May 2) which should be reflected in the aftermarket. Certainly we would all like to see a stronger economy, but we do not see a significant slowdown or recession occurring in 2016 (as of this moment, 11:06 a.m. CDT, May 2).
The industry average performance does not need to be your industry performance. While it is good to be aware of the national economy and other factors which can impact the aftermarket, focus on what you can control.
If you are significantly underperforming the aftermarket indices, that’s a warning that you may have issues other than current economic conditions and you’d best quickly determine what those are and address them.
John Blodgett has worked for MacKay & Company for more than 20 years and is currently vice president of sales and marketing, responsible for client contact for single and multi-client projects. He can be reached at [email protected].
