Your line is open.John McNulty Yeah. Thanks for taking my question. Tim, your first quarter margins, I don’t think we’ve seen them this high other than maybe twice in the last 15 years, and that’s even with adding Traffic Solutions, which I think should be dragging it down in 1Q. So I guess, one, where can we see margins go this year for PPG? And then what are some of the big factors? Is it all price versus raws? How should we think about mix, some of the efficiency measures you were speaking to? I guess can you help us to frame that a bit?Timothy Knavish Well, we’re on a — as you’ve heard me say, John, we are on a margin recovery journey. And as happy as we are with the 380 basis point improvement, we’re pleased with that progress, but we are not satisfied with where we are.
We are not back to historical levels. We’ve still got more work to do and we’re confident that we will continue to see improvement. This frankly, is our second straight quarter of year-over-year margin improvement.We expect Q2 to be the third straight quarter of year-over-year margin improvement. But we’ve got more work more work to do here. And it’s both on the value capture side and getting paid for the products and services that we deliver. It’s mix driven. And certainly, we’ve begun to see some moderation on the cost side.Vincent Morales Yeah, John. This is Vince. Just to give some more numeric guidance here. We’re down still 150 basis points, 200 basis points versus our prior high watermarks, which we hit several times and several times in the past 10 years in the first quarter.
So we have other levers. Tim mentioned one in the opening comments. We’re still not back to where we want to be on manufacturing. Our volumes on a multiyear basis are still down. And again, cost control, which is a legacy here, we feel we could do better. So we still have multiple levers to get back to prior high watermarks and then eventually hoping to exceed those.Operator Our next question comes from Christopher Parkinson from Mizuho. Your line is open.Christopher Parkinson Great. Thank you so much. Can you just offer a little bit more color about what’s embedded in both your aerospace and refinish guidance levels? Just how you’re thinking about for the year? Does aerospace include Boeing’s further build rates, 737 MAX in China, wide-body, some color on that.
And then on the refinish side, just any color about how you think the body shop world, specifically in the U.S. is still dealing with labor constraints and so on and so forth. You have seen pretty optimistic or actually, bullish comments for the second quarter. It’d just be great to know what’s underscoring that in particular versus ’19 levels? Thank you so much.Timothy Knavish Sure. Thanks, Chris. So on the aero side, you mentioned a number of things there and the answer would be yes to all of them. We have a number of positive catalysts there. The China reopening, even though China — international China widebody is still well below 2019 levels. Domestic travel alone drives a lot of MRO activity for us. So that we expect to continue to grow.
You mentioned one of our big OEM customers. You’ve seen their 2023 output so far is much better. So that certainly helps.We’ve got — the backlog continues to grow on both OEM and aftermarket, particularly on the MRO side, so — I’m sorry, on the transparency side. So we’ve got some catch-up of that backlog built into our planning. And the military segment remains very strong. So a lot of what we’ve got built in is the underlying demand strength but also our ability to continue to increase our output because right now, in many parts of our business in aerospace, we can sell whatever we can produce.On the refinish side, again, you have to take out these quarter-to-quarter fluctuations. Fundamentally, the collision business is still very strong.
And so if the body shops are able to get more cars through because they’re able to improve supply on parts, improve labor, we’re in a much better supply situation because most of our supply dynamics are behind us. So we’re really poised to capture whatever throughput output — I’m sorry, throughput increase, they’re able to achieve, which they’re highly motivated to do because their backlogs are so strong.Vincent Morales Just to put some numbers to the [indiscernible]. Just to put some numbers to the China aerospace opportunity, international flights to and from China are down about 70% versus pre-pandemic still. Domestic travel in China is down about 20% versus pre-pandemic. Big – obviously big market for all the aerospace players. And again, for us, that’s all opportunity in both OEM and our aftermarket business.Operator Our next question comes from David Begleiter from Deutsche Bank.
Your line is open.David Begleiter Thank you. Good morning. Hi, Tim. Just on raw materials. What’s embedded in your second half guidance in terms of declines year-over-year? And just on pricing, where are you still implementing price increases?Timothy Knavish Sure. Thanks, David. On raw materials, well, let’s start with — the high-level statement is, we expect to continue to see moderation as we move through the year. And what we actually realized in Q1 was essentially flat on a year-over-year basis. We expect Q2 to be about low-single digits down on a year-over-year basis. And beyond that, we expect continued further moderation, but hard to quantify the scale of that at this point because there’s still so many moving parts. But that’s what I would say on the raw material side.On the pricing side, we did achieve more pricing in Q1.
We were up 8% in total. Above 70% of that is carryover. We were able to achieve some additional pricing in the quarter on an incremental basis. The vast majority of that being in the Performance Coatings segment. So I think as we move forward on price, we’ll comp — we’ll start to comp higher increases as we move through the year from last year. So the increments will be smaller but we are highly confident that for Q2, Q3, Q4, we will print positive price numbers.Vincent Morales And just a reminder, we’re still at a 40 year high inflation rates in our sector, even with this moderation.Operator Our next question comes from Jeff Zekauskas from JPMorgan. Your line is open.Jeff Zekauskas Thanks very much. Two-part question. So first, when you look at your auto OEM prices in the quarter, were they comparable to the industrial segment in general that is industrial was up, I don’t know, maybe 8%?
Is that what auto OEM prices did or were they higher or were they lower? Can you calibrate that? And second…Vincent Morales Jeff, they were certainly in line. Sorry, go ahead.Jeff Zekauskas Yeah. I’m puzzled that your raw materials were flat year-over-year in that oil was $100 a barrel in the first quarter of ’22, and propylene was $0.60 a pound. And I believe that maybe your raw materials probably peaked in the second quarter of 2022 and then came down. So like where is the inflation coming from or there must be something — it seems to be unusual about your raw material basket and that it should be lower than where it was in the first quarter of last year, at least from an outside perspective.Timothy Knavish Hey, Jeff. I’m going to take the auto question.
So yes, auto OEM was consistent with segment pricing, which was about that 8%. And again, I want to remind you, the vast majority of that is carryover, especially in that business. And the new pricing there, much of that was actually negotiated last year. And part of the process in negotiations with auto OEMs is magnitude and timing of implementation. So that’s the answers to your first question. Vince, do you want to take raws?Vincent Morales Yeah, Jeff. I think when you look at our raw materials, one of the things we’ve talked about the last several quarters was pulling that through our inventory. And if you look, we ended the year — we talked about this in the back half of last year, we ended Q3 and Q4 with abnormally high inventory balances.
