July 4, 2016
By Molly MacKay Zacker, MacKay & Company
With tons of buzz words flying around, I keep coming back to those pegged as “words of wisdom.”
Maybe it is because I am always looking for them or maybe it is the need to apply someone’s (anyone’s) wisdom to the current situation, whatever it may be. Lately, there is a fair amount of gloom and doom and maybe it would be beneficial for all of us to rely on words of wisdom — you choose. I certainly would not turn to the current political scene for any wisdom, so what about some wise words?
In my email stash I found: “It might take a year it might take a day, but what’s meant to be will always find its way.” (Kushandwizdom — some type of Pinterest/Instagram/internet store) While I agree that the source is a little uncharacteristic for our industry, the quote is not.
Lots of “volatility” in the news as of late: interest rates may or may not be hiked in June and the markets are reacting to the Fed’s news and a whole host of other factors by greeting the ending daily bell with negative returns. Retail sales forecast for Class 8 trucks look like they will not meet the high numbers reached last year, but they should not drop off the cliff. And the aftermarket?
On a monthly basis, we track several sources — independents, dealers, fleets, suppliers, manufacturers — on a number of aftermarket measures. And while our latest numbers for independents and dealers in our monthly report show lower sales compared to prior month and prior year, the outlook remains positive.
Parts sales going into the warmer season have traditionally peaked and are expected to match this historical trend. Shop sales for independents and dealers are also down month-over-month and year-over-year, but the forecast is positive. Inventory levels are a brighter spot as parts orders continue to land on the shelves. Looking at MacKay & Company’s TEA (Truckable Economic Activity) and Bob Dieli’s Aggregate Spread adds more color to the current picture.
The March TEA indicated that four of the five TEA components posted slower growth but still positive. Exports is the only TEA component that is more negative than last quarter. Having said that, TEA is expected to continue to grow over the balance of 2016. The furthest future point plotted by RDLB’s Aggregate Spread is out nine months, which gets us past this calendar year. Aggregate Spread remains north of the Danger Zone set at 2 percent, which tells us that we are not likely to have a cycle peak.
In MacKay & Company’s May 13 newsletter, Stu MacKay expounded on the cyclical nature of Class 8 sales and the fact that current “slowing” should be of no surprise to anyone. The Class 8 market has been strong over the past six years and a slowing was inevitable.
So what will it take to return to the “good ol’ days”? It might take a year, it might take a day.
The cycle is changing for retail sales, but the Aftermarket will continue to chug along; it too may slow a little. Through the retail sales dip, the test becomes who will weather the change and who will not. Same goes for the Aftermarket — which companies, which channels will persevere? What’s meant to be will always find a way.
Molly MacKay Zacker is MacKay & Company’s vice president of operations. In this capacity, she coordinates many behind-the-scenes activities, manages the Research Department, writes and proofreads reports and presentations, conducts research and interfaces with clients.