Debt Deal, Market Crashes, and Fundamentals

HARDI's economists at ITR provided us with this analysis of the recent "debt deal":

A DONE DEAL?
The Congress passed, and the President signed, a debt reduction deal that the Congress, President, and American people don’t like (by a majority of over 90% according to a poll on Fox News). If you listened to Monday’s Make Your Move on voiceamerica.com, you heard Talbot, Brian and I (Alan) discussing this. I’ll save the various comments for those interested in downloading the program and give you a single point of view.

The Debt Deal will do nothing to change our forecast for the next few years, 2014, 2019 or our projection of a Great Depression in the 2030s. The agreed-to $2.1 trillion reduction (if it actually happens) is too small to matter. We will still add about $10 trillion in debt between now and 2020, and that debt burden has the potential to crush taxpayers and the US Dollar.

Despite such shortcomings, there is a ray of sunshine. The needle moved a fraction of an inch toward a financial reality that might be called rational. It was hard fought and nobody “won” (US debt reached 100% of GDP after the debt ceiling was raised); but perhaps, just perhaps, we have seen the beginning of a potential movement toward financial realism in this country. Let’s hope so.

Yesterday's tanking of the stock market is raising new fears about our economy. Today's slightly better-than-expected jobs numbers and a largely symbolic drop in the unemployment rate to 9.1% has only slowed the rate of the Dow's contraction thus far. Here's a good WSJ video explaining why the debt deal led to a sell-off. That being said, I find it necessary to remind business leaders of our economists' continued conviction that basic industrial and broader economic fundamentals do not support a "double-dip" forecast. Further, the WSJ published a piece today recommending patience at the least (online subscription req'd) and ITR recommended at the beginning of the year aggressiveness with regards to real-estate and other large/long-term expenditures such as leases, vehicles, and infrastructure or equipment upgrades because money is still cheap and corporate earnings, profits, and cash continues to be solid. Be sure you're taking in all the data, and the advice of the most proven experts before making any knee-jerk reactions.

So What Does Our 2011 Mid-Season HVAC Distributor Survey Tell Us?

Today HARDI released to the public the results and analyses of our 3rd annual joint HARDI-JP Morgan Equity Research Mid-Season HVAC Distributor Survey. While I encourage you to read the detailed report yourself which is available for download via a link in the actual release, this year's survey gives us several important insights:

1. 2011 is not going to be a major "recovery year" as many in our industry had projected



2. The residential HVAC business appears to be in the midst of some significant, long-term structural changes



3. Commercial HVAC is better than expected, but not because of long-term positive indicators like new construction, but rather repairs and minor upgrades just enough to limp through another 5 yrs or so



4. We are far from realizing the true impact "dry-shipped" R-22 residential units are going to have on the HVAC industry



5. Inflation is already hitting our industry and will be a major issue unless we can find ways to keep our products affordable to the average residential and commercial customers

There are a lot of findings in this year's survey that many in the industry aren't going to like. It's time we start facing these headwinds and begin adjusting accordingly.

February Distributor Sales Show Mild Improvement but Slower Growth

HARDI announced North American HVACR average distributor sales for February 2011 up over 7% from same month last year and maintained a string of three consecutive months of at least a 10% annual growth rate. February’s numbers showed improvement over January’s performance but continue a downward trend in annual growth rates. See the full release here.

HARDI Economist Discusses Japan Disaster Implications

HARDI Chief Economist, Alan Beaulieu of the Institute for Trend Research, issued a brief today to HARDI member companies outlining the economic implications of the terrible disaster in Japan. Beaulieu outlines how the disaster will have significant impact on some aspects of the economy, but it should not have a major impact on consumer demand in the US. HARDI members who did not receive this brief should contact services@hardinet.org. Non-member companies who would like to receive this kind of information in the future should contact membership@hardinet.org.

AHRI January 2011 Heating, Cooling Equipment Shipment Data Shows Overall Positive Trend for Central Air Conditioners And Air-Source Heat Pumps

AHRI's summary of unit shipping data from January 2011 reports decreases from January 2010 in the movement of residential gas and electric storage water heaters, commercial gas storage water heaters, and oil warm air furnaces, and increases for commercial electric storage water heaters, gas warm air furnaces, central air conditioners, and air-source heat pumps.

Overall, January 2011 shipping data is positive for central air conditioners and air-source heat pumps, especially when considering the December 2010 data, according to Andrew Duguay, HARDI economic analyst. See HARDI's complete summary and analysis here.

Distributor Growth Cools Considerably to Start 2011

HARDI announced North American HVACR average distributor sales for January 2011 affirmed the association’s concerns about a post-tax-credit-slump following the 25c tax credit cap reduction from $1,500 to $500. The January 1, 2011 cap reduction also include the imposition of a “lifetime cap” barring previous credit recipients dating back to 2006 from claiming credits for additional energy efficiency improvements performed this year. HARDI’s Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report showed average growth for the month down nearly 12% from last month’s strong 17.4% average growth rate. Click here for the full release.

Early 2011 HVACR Events Fuel Increased Optimism

2011's AHR Expo in Las Vegas a few weeks ago was the best of that event I've seen since joining our industry in 2006. Well attended and energetic, this year's Expo got me rethinking my rather subdued forecast for 2011. I just returned from ACCA's Annual Conference and Indoor Air Expo in San Antonio, TX (great town, btw!!) and was excited to see the Expo's momentum carry into and through this key industry event.

HARDI has always been a supporter and proponent of ACCA, but after attending my first ACCA Conference, I'm convinced we need to step up our promotion of our industry's primary contractor trade association. We'll all benefit from growing its membership footprint so more contractors can be exposed to and learn from a number of the most impressive professional contractors you'll find in our industry. ACCA's sessions are usually led by members willingly sharing their last innovations and roadmaps to their significant successes. This is a great atmosphere, and the ACCA contractors we met there were the picture of the type of contractors HARDI distributors always say they prefer to do business with.

If you're a contractor and not an ACCA member, join today and book your flight to next year's Annual Conference in Las Vegas. If you're a distributor and have never attended an ACCA Conference, mark your calendar for March 5-8. In the meantime, take a close look at ACCA's new Quality Assured Contractor Recognition Program unveiled in San Antonio. It's a big deal.

Small Biz Lending Stabilizing, Opportunity for 2011 Growth

For Release: February 10, 2011

Contact: Patrick Morris (202) 205-6941

patrick.morris@sba.gov

Small Firm Lending, 2009-2010: Harbingers of Growth

WASHINGTON, D.C. –Lending to small firms by U.S. financial institutions continued to decline, but began to stabilize in some loan size categories over the 2009-2010 period. This is according to the Office of Advocacy’s latest edition of Small Business Lending in the United States, released today. The study finds that small business lending dropped by 6.2 percent, less than the 8.9 percent drop experienced in large firm lending over the 2009-2010 period. GDP has turned upward, and business lending may follow the pattern of other recessions, in which commercial and industrial lending grew only after recovery was well under way.

“Businesses and lenders continued to exercise caution in borrowing and lending through 2009-2010,” said Chief Counsel for Advocacy Winslow Sargeant. “As the economy improves, this study, through its state-by-state display of lender performance, can help both small business borrowers and lending institutions see where small firms are beginning to find the capital they need.”

The study finds that lending in the smallest business loans under $100,000 began to stabilize in 2009-2010—the total was down by 1 percent, compared with a 5.5 percent drop in 2008-2009, and real estate loans accounted for the entire decline.

Small Business Lending in the United States, 2009-2010, uses data reported by financial institutions to their regulatory agencies to compile state-by-state rankings of these institutions with respect to their small business lending. Two types of reports are used: Consolidated Reports of Condition and Income (Call Reports) and Community Reinvestment Act (CRA) reports. (The rankings are unrelated to banks’ status with respect to Small Business Administration lending programs.)

The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed Chief Counsel for Advocacy advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policymakers. For more information, visit www.sba.gov/advo, or call (202) 205-6533.

Strong December Sales Reaffirm Tax Credits' Impact

HARDI announced North American average HVACR distributor sales for December closed out 2010 in line with the association's forecast, but fell short of most manufacturer and analyst projections going in to the year. HARDI's monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) report showed average growth for the month of 17% over December 2009, undoubtedly driven by the impending expiration of the full $1,500 residential tax credits. Click here for the full release.

All About 2011 Forecasting

I couldn't be happier with our special January issue of HVACR Distribution Business which is entirely devoted to forecasting 2011. Forecasting features by HARDI's Chief Economist, Alan Beaulieu, JP Morgan's Stephen Tusa, Douglas Elmendorf, Director of the Congressional Budget Office, Jim Beecher of G.W. Berkheimer, and much more. Dare I say this is the finest issue the magazine has ever published so check it out now.

The NEWS Podcast on Latest Facing HVACR Distributors Now Available

Check out this podcast by The ACHR NEWS discussing issues and opportunities we see facing HARDI distributors this year. The NEWS' entire "Newsmakers" podcast series is great so be sure to check it out each week.

Distributors' November Sales Strong, but 2011 Challenges Loom

"The latest numbers from HARDI distributors is very encouraging, however a word of caution is worthwhile given the outlook for housing, end of the [full] tax credit, and the outlook for the commercial industry," said HARDI Chief Economist, Alan Beaulieu. "Banks are beginning to lend more commercially but housing will be an ongoing lending issue. We would suggest that too much not be read into the numbers. A straight-line projection at this point could be disastrous."

See the full release here. HARDI will be releasing a down-graded forecast for Q1 2011 next week and hosting a webinar with Beaulieu on January 18 exclusively for HARDI members. Go to www.hardinet.org for more information.

MDM's 6 Trends Driving Distribution in 2010 Spot On

If you don't read MDM and are involved in wholesale distribution (or go to market through wholesale distribution) you need to start now. Their 2010 year in review is right on in my opinion and identifies the same drivers HARDI is using in our own strategic planning to provide new and greater value to our members. Next month The Wholesaler will publish our 2011 forecast for HVACR distribution which was written before we saw MDM's 2010 review, but goes into detail on several of these same trends' impact on 2011.

Distributor Inventories and Sales Rise Again in September

HARDI announced North American HVACR median distributor sales for the month of September 2010 were up over 10% from last year in its Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report. This marks the seventh consecutive month in which overall distributor sales were up from the previous year. Running twelve month sales were up for the second consecutive month. Seven of HARDI’s U.S. regions outperformed the same month last year, and five regions experienced double digit growth compared to last September. Canada continued its strong run and maintains the highest running twelve growth among all HARDI regions. Click here for the complete release.

2010 Annual Conference: Distributors Stepping Up

Last year's HARDI Annual Fall Conference was dominated by the AHRI-ACEEE regional standards consensus agreement. This year's Conference was hijacked by "dry-shipped" R-22 residential condensing units. Many in-depth discussions were had and it became obvious how important HARDI's position and role in this issue will be to determining how long this practice might continue.

Attendance mirrored our industry's performance this year by far exceeding 2009, but falling just short of 2008. With 1,100 of the the HVACR industry's finest, this conference also featured the most participation by equipment manufacturers to date with Nordyne, Rheem, Trane, Goodman, Mitsubishi, Daikin, Sanyo, LG, and even more. Allied Air was especially recognized for a whopping 50 years of participation in our Conference Booth Program.

HARDI's Board of Directors added over 50 new wholesale distributor members, with many being part of a new strategic partnership with Johnstone Supply. Mingledorff's Inc. won this year's NATE testing award for providing the most NATE tests as an organization, and helping HARDI's distributor membership maintain its standing as the #1 provider of NATE testing.

Just about every Committee and Council meeting and session was packed or over capacity as distributors attempt to grow their competitive advantages by being the most informed and most efficient. Check out #hardiconf on Twitter for play-by-play from Houston.

Thank you to our special guests and presenters from AHRI, ACCA, NATE, HRAI, Consortium for Energy Efficiency, US EPA ENERGY STAR, Food Marketing Institute, Alliance for Responsible Atmospheric Policy, and JP Morgan Equity Research. And as always HARDI's economists from the Institute for Trend Research were outstanding.

Distributor Inventories and Sales Rise in August

Columbus, OH- Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR median distributor sales for the month of August 2010 were up over 15% from last year in its Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report. This marks the sixth consecutive month in which overall distributor sales were up from the previous year. For the first time this year the running twelve month sales were in the black, albeit slightly. Seven of HARDI’s U.S. regions outperformed the same month last year, and two regions’ August growth exceeded 20%. Canada continued its strong run and maintains the highest running twelve growth among all HARDI regions. See the complete release here.

HARDI Discusses HVAC Outlook for 2010 and Beyond with The NEWS

The NEWS discusses JP Morgan's 2010 HVAC Market Outlook forecast with HARDI in its latest issue and captures some of HARDI's hesitations about several of the Outlook's highly optimistic prognostications.

Strong July Sales Push HARDI Distributors Closer to Recovery

Columbus, OH- Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR distributor sales for the month of July 2010 were up over 13% from last year in its Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report. This marks the fifth consecutive month in which overall distributor sales were up from the previous year, however, running twelve month sales still failed to push into the positive. All but two of HARDI’s seven U.S. regions were up in July with three exceeding 18% growth. Canada continued its strong run and maintains the highest running twelve month growth among all HARDI regions. See the full release here.

JP Morgan: May AHRI Shipments Disappointing

May A/C and HP shipments were down 4% while HARDI sales were up 7.6% but JP Morgan is maintaining their double digit growth projections for the year based on Q1 shipments up cumulatively 9%. Check out page two of the JP Morgan alert for corrallations between AHRI and HARDI data.

Most HARDI Distributors Recovering

Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR distributor sales for the month of May 2010 were up nearly 8% from last year in its Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report. This marks the third consecutive month in which overall distributor sales were up from the previous year. To see the full release click here.