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.

Carrier Petition to EPA to Stop "Dry-Shipped" Stirring the Pot

The NEWS' story this week announcing Carrier Corps petition filed with the EPA to reclassify condensing units as "subsystems" and therefore make the manufacturer of "dry-shipped" R-22 condensing units illegal has really fired up some in the industry. Check out the comments posted in response to The NEWS article. Anyone who still thinks these "dry-shipped" units are going to be an insignificant percentage of total shipments is either selling R-410a or in the window-banger business. By the way, HARDI had been asked to provide comment for the article but we do not have a formal position yet on Carrier's petition.

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.

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.

HARDI Expresses Concerns Over New Energy Star Furnace Specs

Just posted to HARDI's website, HARDI filed comments with U.S. Environmental Protection Agency (EPA) ENERGY STAR program on the latest draft of proposed specifications for the next generation of residential furnace's labeling program. Think regionalization and take a guess at the majority of our concerns.

The NEWS: DOE to Provide $7mil to 24 States to Update Energy Codes

If you've not seen this article from The NEWS, you need to. ARRA (the stimulus bill) provided the U.S. Department of Energy (DOE) with funds to use as a carrot and stick to states to adopt and enforce more stringent building energy codes (IECC for residential, ASHRAE 90.1 for commercial). For many states, and now 24 more, the time to debate whether the more stringent energy codes are reasonable, attainable, or justified has passed, and now it's up to our industry to figure out how to live with them (and not allow another California Title 24-ish disaster to occur). If you're not closely tied into your state(s)' energy offices, code officials, etc., you had better find a way to do so quickly...especially in these 24 states.

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.

The Good, Bad, and Future of 25c Tax Credit Extension

It should not be minimized what a victory it was to have an extension of the 25c tax credit for residential energy efficiency improvements included in the tax bill that was signed into law last week. Just a few months ago most lawmakers knew little about 25c, and it was competing against a Rockefeller Center-sized Christmas tree of other tax provisions for inclusion in that bill. Congrats to HARDI's Manager of Government Affairs, Jon Melchi, ACCA's VP of Govt. Affairs, Charlie McCrudden, and Austin Primiano of Lennox International who tirelessly worked Washington and coordinated efforts over the last several months to secure this extension.

Unfortunately, an extension in today's political climate cost a reduction in the credit amount but I know HARDI will continue to work towards at return to the previous $1,500 credit level. As evidenced in this Columbus Dispatch article, the reduced level is causing a rush by many homeowners to get improvements and HVAC installations done before the full $1,500 credit expires next week. November and December are shaping up to be huge months for HVAC distributors and contractors, however we must look ahead to what could be a tough Q1 next year. 2011 will be about getting back to basics. A $500 credit is nice, but it won't create demand like $1,500 did so be prepared to use slow January and February to train and educate your people and put them in the best position possible for a grind-it-out 2011.

22 Building Trades Leaders Make Late Push for 25c Extension

HARDI and 21 other leading organizations representing manufacturers, distributors, contractors, small businessess, state officials, and energy efficiency interests sent a letter today to Senate leadership urging the full extension of the "25c" tax credit set to expire at the end of the month. 25c provides homeowners with access to a credit up to $1,500 for qualifying energy efficiency improvements, and has been essential to HARDI distributors' modest growth in 2010.

Currently the Senate is debating a tax bill which includes only a one-year extension after a slashing of the credit amount, and HARDI has concerns that the severely paired down extension will provide just extremely limited sales and employment benefit to the HVAC industry. We have little time left to try to get a full extension passed by the Senate. Go to www.savehvacjobs.com today to do your part to help!

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.

Rheem Manufacturing Looks to HARDI to Sharpen Forecasts

Supplier Member, Rheem Manufacturing in Fort Smith, Arkansas, hosted HARDI’s Talbot Gee to discuss ways HARDI’s Targeted and Regional Economic News for Distributor Strategies (TRENDS) program and Chief Economist, Alan Beaulieu, and the major HVAC and water heating manufacturer could work more closely together to build better market forecasts and channel efficiency. HARDI and Rheem also discussed changing channel and market dynamics as well as the impact of current and future policy issues on the HVACR industry.

Pictured left to right: Talbot Gee, HARDI, Ken Rothgeb and Bill Hanesworth, Rheem

ACCA-RESNET MOU a Step in Right Direction

ACCA and the Residential Energy Services Network (RESNET) announced the signing of an MOU "to work together to promote home energy performance". This is a positive and important step forward for the HVAC industry as it should streamline the ability for quality ACCA contractors to participate in whole-home, performance-based energy efficiency retrofit programs such as Home Performance with ENERGY STAR. Hopefully this can lead to an accreditation process to distinguish the best, most skilled contractors who are capable of performing or leading whole home retrofits.