Consumer demand for replacement passenger and light truck tires improved in June compared to June 2016. It was the second consecutive month volumes improved on a year-over-year basis.
According to the Northcoast Research Tire Demand Index, comparative demand in June was stronger than in May.
"While June marked the strongest sell-out trends that we have seen since the start of the year, we believe sell-out volumes were flattish in the second quarter of 2017," says Nick Mitchell, a managing director and research analyst with Northcoast Research Holdings LLC.
"The sluggish sell-out trends in 1H17 created a difficult operating environment in the short-run; however, the inability of any of our contacts to point to any structural factors that might be creating secular pressures on demand trends, in addition to the encouraging results in June, leads us to believe that the odds are still high the weak trends will prove to be transitory."
From a pricing perspective, Mitchell says the broader pricing environment started to firm in June, "largely reflecting a stabilization in promotional activity that followed some minor progress working down channel inventories." However, he believes the channel is still dealing with higher-than-planned inventory levels.
"Generally speaking, the dealers continue to indicate that consumers’ preferences have shifted away from Tier 3 brands over the past 11 quarters. This trend continued in June as Tier 3 brands finished at the bottom of the list."
Mitchell says the index has been flat or in expansionary territory in 39 of the last 45 months, which bodes well for tire dealers and tire manufacturers.
"These findings give us confidence that the domestic replacement market is still in a volume recovery cycle, which should clearly benefit tire manufacturers like Goodyear and Cooper for the foreseeable future and provide a tailwind to installers, including Monro Muffler."
The monthly Tire Demand Index is a proprietary measure designed to gauge the strength of retail demand for replacement consumer tires in the U.S.