Commercial Motor Vehicle Consulting (CMVC) developed a commercial vehicle (CV) Parts Aftermarket Leading Indicator (PLI) using parts aftermarket sales from a tier-one CV components/parts supplier with a broad product line that expands across several component groups, for example brakes. PLI will be published monthly by CMVC and to subscribe to the PLI newsletter contact Chris Brady.
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, since 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, since 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.