This morning (Oct. 1) I heard a sportscaster discuss the end of the first quarter of the NFL season. His point was NFL teams have completed four games of the 16-game season. On the calendar, we are done with three quarters (Do I need to tell you how many months?) of the year, so I thought I would provide an update on the heavy-duty aftermarket year-to-date.
Regarding the economy, we are 112 months into an economic expansion, the second longest expansion since the end of WWII. The longest (in the 1990s) was 120 months, so we are not far from beating that record.
Business and confidence are good and consumer confidence hit an 18-year high last month. When consumers and businesses feel good about economic conditions, things get bought and get moved on trucks, and trucks get bought and get used more. All good for most people reading this magazine.
At MacKay & Company, our economist Bob Dieli has a short-term (nine months) outlook tool called Enhanced Aggregate Spread (EAS). Currently, this outlook tool indicates we may be moving into another phase of the economy called the boom phase in the first quarter of next year. The boom phase is the last phase before a recession. It is an economic expansion phase but with more volatility. There is no defined period for the boom phase. If it does start next year, it could last a couple years.
The employment numbers have been good and, although I don’t pretend to understand some of the tariff and trade war actions and discussions of this administration, as of writing this, it sounds like we have a replacement for NAFTA with Canada and Mexico, which should at least provide some stability on this continent.
At MacKay & Company, we have a report called TEA® (Truckable Economic Activity) which basically looks at a subset of GDP, the products and goods that can move by trucks, plus a portion of imports. TEA was up over 4 percent for each of the first two quarters this year, with indications for the third quarter to be as strong.
So, the economy looks good. What have we seen in the aftermarket? Each month, we publish a report called DataPulse Plus which, in part, surveys truck dealers and independent heavy-duty parts distributors about their parts sales year to date (compared with last year). Through August of this year, we heard truck dealers were up 7.7 percent and heavy-duty distributors were up 3.9 percent. Both groups have been up every month this year so far.
We have another monthly index of truck component manufacturers and their sales to distribution points. This group also has had a good year with the index up 6.2 percent through August.
Finally, we also have a report that measures fleet utilization every quarter called DataPulse. The first two quarters have been strong with indications that the last half of the year should be at similar levels.
Retail sales of trucks this year (Ward’s Automotive) have been strong and the forecast (FTR) for next year is very strong — both good indicators of the economy and future aftermarket demand.
Here at MacKay & Company, our latest forecast for the medium- and heavy-duty aftermarket is to be up 6.1 percent in 2018 and I believe our price factor might be low.
So, my suggestion?
Stay away from TV, Twitter and other news sources that will depress you these days and focus on grabbing as much of this good aftermarket as you can.