CV Parts Aftermarket Leading Indicator Increases in January
March 01, 2012
A new industry index that tracks aftermarket parts rose slightly in January. Commercial Motor Vehicle Consulting's new CV Aftermarket Parts Leading Indicator increased 0.03% in January to 104.70 (January 2001=100) following a 0.01% decrease in December (104.67) and a 0.61% increase in November (104.68).
The upward slope in the indicator has flattened out over the past few months.
PLI is signaling the growth rate of commercial vehicle parts aftermarket sales will decelerate in the near term, says Commercial Motor Vehicle Consulting. Aftermarket sales will continue to expand, but the rate of growth is decelerating in comparison to growth rates in 2011.
The component series that make up the composite index, PLI, continue to improve, signaling higher CV parts aftermarket sales, but the rates at which these component series are improving are moderating. The commercial vehicle population continues to operate at high utilization rates, implying truck depreciation will continue to stimulate parts consumption.
Industrial production, a measurement of freight growth, is expanding, so fleet capacity utilization will remain at high levels in the near future, say CMVC analysts. The Dow Jones Transportation Index and For-Hire Trucking Producer Price Index imply expectations of higher profits for the trucking industry, so rising diesel fuel prices in the near term should not alter truck operators' preventive maintenance programs.
Commercial Motor Vehicle Consulting developed the commercial vehicle Parts Aftermarket Leading Indicator using parts aftermarket sales from a commercial vehicle supplier with a product line that expands across several component groups.
PLI was designed to be a short-term forecasting indicator of U.S. commercial vehicle parts aftermarket sales by signaling peaks/troughs and inflection/turning points in parts sales due to changes in fleets' business environments as a result of cyclical change in the business cycle - expansion, recession and recovery.
PLI does not measure changes in trend factors, such as vehicle demographics, that have a medium and/or long-term influence on parts aftermarket sales, because changes in trend factor variables lag the fluctuation and turning points in parts sales related to changes in the business cycle when cyclical factors overwhelm trend factors. Trend factor variables are not good predictors of changes in parts aftermarket sales related to changes in fleets' business environments.
A composite index was constructed to signal fluctuations in CV parts aftermarket sales, because the contribution of one data series over time differs from parts sales, so a composite index comprised of multiple data series is a better predictor of fluctuations/turning points in parts sales as the composite index gains better predictive powers from diversification.