Southeastern Region - HARDIhardinet.org/wp-content/uploads/2016/10/HARDI... · nars, monthly issues...

Prepared by:

ITR Economics

Manchester, New Hampshire

Reproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by

Heating, Air-conditioning & Refrigeration Distributors International.

October 2016

Southeastern Region

Alabama, Florida, Georgia, Mississippi, North Carolina,

South Carolina, Tennessee, Virginia

Reproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.


Thank you to the following HARDI Sustaining Members whose support helps make this report possible:

Alltemp Products Co. LTD

Arzel Zoning Technology, Inc.

C&D Valve

CPS Products, Inc.

Centrotherm Eco Systems

CertainTeed Corporation

Columbus/TPI HVAC Division

Continental Industries, Inc.

Cooper-Atkins, Corp.

E.V. Dunbar Co.

Embraco

EWC Controls, Inc.

Golden Refrigerant

Haier America

Harris Products Group

Heat Transfer Products Group

Holyoke Fittings Inc.

International Comfort Products

JMF Company

Khauf Insulation GmbH

Martin Walshin, Inc.

Metal-Fab, Inc.

Mortex Products, INC.

National Compressor Exchange

Owens Corning

Panasonic Eco Products Division

Rawal Devices

Reflectix, Inc.

Research Products Corporation

RSES

Sauermann NA Corp

Seal-Tite, LLC

Site-Seeker, LLC

Snappy

Superior Radiant Products, Inc.

TACO, INC.

Trion

Ventamatic, Ltd.

Wells Fargo-CDF

White-Rodgers

Williams Comfort Products


Make Sure Your Company is Ahead of the T.R.E.N.D.S.!

HARDI is excited to offer our latest member benefit in partnership with Alan Beaulieu and the Institute for ITR Economics:

T.R.E.N.D.S. Includes:

Monthly HVACR distributor total sales reports

Quarterly HVACR specific analysis of economic indicators broken down by HARDI region and major market service areas across the United States

Major economic indicators correlated with HARDI members’ aggregated sales data

Management recommendations from Alan Beaulieu and ITR for each economic trend specific to each HARDI region

HARDI Distributors who Contribute Monthly Sales Data Receive:

Free access to all Monthly Sales T.R.E.N.D.S. reports

Free access to all detailed and HVACR-specific regional quarterly economic forecasts and webinar programs

Non-participating distributor members will NOT receive any of these reports or forecasts

HARDI Premier and Sustaining Supplier Members:

Become a Premier HARDI member for an additional $3000 and be the only one to receive the Monthly Sales T.R.E.N.D.S. Reports (including special recog-

nition in each report), all of the complete quarterly economic forecasts for each HARDI U.S. region, free access to HARDI’s quarterly economic forecast webi-

nars, monthly issues of the exclusive HARDI TRENDS Manufacturing Optimization Report, and a complimentary booth at the Annual Conference Booth Pro-

gram

Become a Sustaining HARDI member for an additional $2000 and be the only one to receive the Monthly Sales T.R.E.N.D.S. Reports (including special

recognition in each report) and a complimentary booth at the Annual Conference Booth Program

Non-Premier or Sustaining Supplier Members will NOT have access to any of these benefits

All HARDI Members Receive:

Reduced member-only pricing on ITR’s company-specific Executive Vantage Point™

Analysis

For more information or questions, please contact Brian Loftus at (888) 253-2128 or [email protected]

mailto:[email protected]

Table of Contents


Economic Overview………………………………………………………………………………………………………………………….. 1

National Mortgage Rates……………...………………………………………………………………………………………………….. 2

National Commercial Lending Rates…………..…………………………………………………………………………………….. 3

National Construction Inflationary Pressures.….………………………………………………………………………………… 4

National General Inflationary Pressures………………………………...………………………………………………………….. 5

Steel Prices……………………………………………………………………………………………………………………………………….. 6

Copper Prices……………………………………………………………………………………………………………………………………. 7

National Home Improvement Construction……………………………………………………………………………………….. 8

National Consumer Activity……………………………………………………………………………………………………………….. 9

Regional Housing Construction…………………………………………………..…………………………………………………….. 11

Housing Permits by State…………………………………………………………………………………………………………………... 12

Median Home Prices by State……………………………………………………………………………………………………………. 13

Regional Housing Construction Forecast……………………………..………………….…………………………………………. 14

Click Here for a Brief Explanation of How to Read the Report

http://www.youtube.com/user/TrendResearch?email=share_video_user#p/a/u/0/RFi6bgeBpGc

Table of Contents


Regional Nonresidential Construction………………………….……………...…………………………………………………... 15

Nonresidential Construction by State by Value………………………..……………………....…………………………….…. 16

Regional Nonresidential Construction Forecast……………………….………..……………………………………….……… 17

Cooling & Heating Demand by State………….………………………………………………………………………………………. 18

Consumer Credit Availability…………………………………………………………………………………………………………….. 19

HVAC Factory Shipments ……………………………………………………………..…………………………………………………… 20

Appendix………………………………………………………………………………………………………………………………………….. 21

Management Objectives……………………………………………………………………………………………………………………. 22

Click Here for a Brief Explanation of How to Read the Report

http://www.youtube.com/user/TrendResearch?email=share_video_user#p/a/u/0/RFi6bgeBpGc


When reading the news about the struggling US industrial sector, it is

easy to become lost in pessimism. However, the upcoming year will be a

better year than 2016, as the economic fundamentals and leading

indicators point to expanding US business-to-business activity, rising

global demand, and a strong US consumer. Average US Industrial

Production for the past 12 months, down 1.3% from one year ago, is

hampered by contraction in the Mining and Utilities components.

However, the quarterly growth rates for US Mining Production and US

Electric and Gas Utilities Production, the two laggards of US Industrial

Production, are rising. Recovery in these components in the coming

months will support an imminent transition to a recovery trend within US

Industrial Production. This is corroborated by the general rise in the rate-

of-change for the US Total Industry Utilization Rate. We expect a rising

trend in annual Industrial Production to take hold by late 2016 and

subsequently rise through 2018, as the headwinds facing the commodity-

dependent segments of the US economy fade, allowing for positive

consumer trends to drive growth.

Consumers are supporting US Real GDP growth while the industrial side

of the economy wanes. Annual Personal Consumption Expenditures

reached a record $12.6 trillion, driven by rising wages that outpace

inflation and a record-high level of Private Sector Employment. Rising

incomes, rising employment, and low interest rates are contributing to

the growth in consumer spending; US Total Retail Sales Excluding Gas

Stations (deflated) are up 3.4% on a year-over-year basis. Expect

consumer spending to pick up in 2017 as the macroeconomy grows.

Private Nonresidential Construction has been growing at a slower pace

since March and slowing growth will persist into late 2017. The rate of

growth in US Warehouse Buildings Construction, which is up 17.4%, will

begin to slow by the end of 2016. Despite the slowing rate of growth, this

market will provide growth opportunities for sales, as consumers

increasingly shift purchases to online stores, requiring new distribution

centers to be built. US Total Manufacturing Production is in a slower

growth trend, which is hindering growth in US Manufacturing

Construction.

The upcoming recoveries in US Industrial Production and business-to-

business activity will support growth in 2017 in many segments that

HARDI members operate within, benefitting sales in 2017. Plan for

increasing economic activity next year by hiring, training, and retaining

employees now in preparation for increasing demand. Also, consider

undertaking capital expenditures at today’s low interest rates, if your

balance sheet permits, to prepare for growth next year. Next year is

gearing up to be a promising year for the economy and for sales growth

opportunities; do not get caught on your heels when demand begins to

pick up. Be proactive in your planning and budgeting to be there for your

customers and fulfill orders both on time and with top quality.

Economic Overview

80

85

90

95

100

105

110

115

120

80

85

90

95

100

105

110

115

120

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

US Industrial Production Index Trend

1

Industry

Summary


National Mortgage Rates

Rate: 3.46% for 30-Year Fixed Phase: A Month-over-Month: -11.1%

The average National Conventional 30-year Mortgage

Rates closed September at 3.46%. While this marks a 43

basis-point decline from September 2015, 30-year Rates

began settling higher recently after bottoming out at

3.44% in July. The tentative upward movement in Rates

is barely perceptible at this point, but could gain steam

moving through the fourth quarter. In the minutes from

the latest Federal Reserve meeting in September, Fed

officials communicated that they expect to raise rates

again “relatively soon”. Ambiguous by normal standards,

but for the Federal Reserve, the minutes reflect a

stronger messaging in favor of a rate increase than we

have heard in recent months. It is unlikely that the Fed

will raise rates on the eve of the presidential election, so

December becomes the most likely month to get the

next rate increase. Looking to 2017, as the

macroeconomy will be strengthens, leaving the Fed with

less to justify holding rates at this level next year.

0

1

2

3

4

5

6

7

8

0

1

2

3

4

5

6

7

8

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Mortgage Rate Trend

Monthly Data

-30

-20

-10

0

10

20

30

40

-30

-20

-10

0

10

20

30

40

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

1/12 Growth Rate

Month-over-Month Business Cycle

2

Industry

Summary


National Commercial Lending Rates

Rate: 0.75% for 90-Day Commercial Paper Phase: C Year-over-Year: 167.1%

US Short-Term Interest Rates ticked up to 0.75% in

September, up 47 basis points from the September

2015 level (0.28%). Short-Term Rates also rose from

0.55% at the end of the second quarter, gaining

momentum despite the Federal Reserve not hiking

interest rates in recent months.

The latest messaging from the Federal Reserve’s

September meeting signaled that Fed officials expect to

raise rates again “relatively soon”. The central bank is

unlikely to hike rates just before the election, given the

potential for immediate stock market and currency

fluctuations. This makes December the most likely

timing of the next increase. Looking beyond 2016 and

factoring in ITR’s expectations for an overall accelerating

economy in 2017, rates are poised to rise at a quicker

pace next year. Evaluate your long-term goals and, if the

time is right for your business, use this opportunity to

secure capital at a favorable rate before capital costs

move higher next year.

0

1

2

3

4

5

6

0

1

2

3

4

5

6

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Short-Term Interest Rate Trend

Monthly Data

-160

-80

0

80

160

240

320

-160

-80

0

80

160

240

320

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

1/12 Growth Rate

Year-over-Year Business Cycle

3

Industry

Summary


National Construction Inflationary Pressures

Monthly Index: 230.2 Phase: B Year-over-Year: 1.0%

The oil glut that drove oil and raw material prices down

over the last year provided a period of respite to

builders in the form of lower material and fuel costs,

but that period has come to an end. The US Materials &

Components for Construction Producer Price Index

transitioned to Phase B, Accelerating Growth, during

the last quarter. The Index closed September up 1.1%

versus September 2015, as Material and Component

Prices are accelerating versus their year-prior levels.

Metal Prices are on a notable upswing. Aluminum broke

above the year-ago level during the third quarter. US

Steel Futures closed September up 2.5% versus last year

and Galvanized Steel costs 30.2% more per ton than it

did in September of 2015. Copper remains reluctant to

turn, with Futures Prices down 6.1% versus the 2015

level. Fuel Prices are rallying; Oil Futures closed

September at $48.24 (up 7.0%) and Natural Gas Futures

rose to $2.91 (up 15.1%).

160

180

200

220

240

160

180

200

220

240

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Construction Material Price Index Trend

Monthly Data

-8

-6

-4

-2

0

2

4

6

8

10

12

-8

-6

-4

-2

0

2

4

6

8

10

12

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

1/12 Growth Rate


4

Industry

Summary


National General Inflationary Pressures

Monthly Index: 240.9 Phase: B Year-over-Year: 1.1%

Inflationary pressures picked up in August, rising 1.1%

above the August 2015 level. Deflationary prices in

Energy and easing inflationary pressure for Food items

are being outpaced by rising Medical prices. We expect

the rise in business-to-business activity and expansion

in the US economy in 2017 will support rise in

commodity prices in 2017, which will contribute to

inflationary pressures through 2018.

Health Insurance Prices rose 9.1% from the year-ago

level and consumers are spending 4.9% more on

Medical Care than in August 2015. Evaluate the need to

offset the increased cost of healthcare on your bottom

line against your interest in attracting and retaining top

talent. High-caliber employees are demanding benefits

packages that serve to shield them from risk of future

inflation in this segment.

175

200

225

250

175

200

225

250

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Consumer Price Index Trend

Monthly Data

-3

-2

-1

0

1

2

3

4

5

6

-3

-2

-1

0

1

2

3

4

5

6

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

1/12 Growth Rate


5

Industry

Summary


Steel Prices

Quarterly Trend: $855.9 per ton Phase: C Year-over-Year: 32.8%

Galvanized Steel Prices averaged $855.9/ton in the

third quarter, up 32.8% versus Prices in the third

quarter of 2015. However, Prices settled down to

$817.5/ton at the end of September. Prices have been

rising since the onset of 2016, but dipped in the last

three months since tentatively peaking in June 2016.

US Steel Futures Commodity Prices closed September

at $205.00 per gross ton. Average Prices in the three

months through September fell to $210.00 per gross

ton, 1.9% below the same quarter last year. We expect

Steel Prices to decline further through the end of 2016.

Accelerating industrial demand in 2017, both in the US

and China, will then drive a firmer rising trend next

year. Pass on savings from low input costs in order to

attract new customers and capture market share while

Prices are lower this year.

0

200

400

600

800

1000

1200

0

200

400

600

800

1000

1200

'10 '11 '12 '13 '14 '15 '16 '17

Galvanized Steel Price Trend

3-Month Moving Average

-40

-20

0

20

40

60

80

-40

-20

0

20

40

60

80

'10 '11 '12 '13 '14 '15 '16 '17

3/12 Growth Rate


6

Industry

Summary


Copper Prices

Quarterly Trend: $2.16 per pound Phase: A Year-over-Year: -7.9%

Copper Prices averaged $2.16 per pound in the third

quarter, down 7.9% compared to the third quarter

last year. Prices have been averaging between $2.10

and $2.20 per pound for most of 2016, but the rates-

of-change are moving in a positive direction since

bottoming out in late 2015. We expect upside

pressure to build in Copper Prices throughout the

fourth quarter, averaging $2.27 per pound in the

fourth quarter. Prices will continue to gain

momentum into the second half of 2017. While most

metal commodities (Aluminum, Galvanized Steel,

Lead, Tin, Zinc) have all surpassed their year-ago price

levels, Copper has been the slowest to turn.

Accelerating industrial activity next year, along with

growth in residential and nonresidential construction,

will drive year-over-year price growth for copper and

copper products .

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Copper Price Trend


-100

-50

0

50

100

150

-100

-50

0

50

100

150

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

3/12 Growth Rate


7

Industry

Summary


Remodeling activity across the US is cooling. The

National Remodeling Market Index averaged 55.2 over

the last 12 months, down 5.7% versus the 2015 level.

However, the diffusion Index is holding above the 50.0

threshold, indicating overall growth on a quarter-to-

quarter basis. The second quarter reading for the

Remodeling Market Index came to 54.0, down from

54.5 in the first quarter and 8.9% below the second

quarter of 2015.

Existing Home Sales, which lead the Remodeling Market

Index by three months, are in a slowing trend as well.

Sales in the last 12 months are up 3.4% compared to

the same period last year, but Sales in the most recent

three months are up a more modest 0.6%. However,

with record employment levels, accelerating New

Home Sales, and quickening wage gains, we expect this

decelerating trend to be short-lived. Accelerating Sales

in 2017 will help drive remodeling activity higher.

National Remodeling Market Index

Annual Trend: 55.2 Phase: D Year-over-Year: -5.7%

-40

-30

-20

-10

0

10

20

30

40

-40

-30

-20

-10

0

10

20

30

40

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

12/12 Growth Rate


0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

National Remodeling Market Index


8

Industry

Summary


National Consumer Activity

Annual Trend: $2.275 trillion Phase: C Year-over-Year: 1.9%

US Total Retail Sales (deflated) during the past 12

months are up 1.9% from the year-ago level, totaling

$2.275 trillion. Retail Sales in the past three months are

up 1.6%. We expect consumer activity to grow at a

slower rate through year end before accelerating by

early 2017 and continuing to gain momentum

throughout the year.

US Building Materials and Supplies Dealers Retail Sales

during the last 12 months rose 7.1% from the same

period one year ago, but Sales in the most recent three

months are up a less robust 6.0%. As overall consumer

spending and spending on Building Materials and

Supplies slows, HARDI members will likely feel slower

growth in the final months of 2016 as well. However,

this will be short-lived, with acceleration in total

consumer activity and residential construction

occurring by early 2017.

-12

-10

-8

-6

-4

-2

0

2

4

6

-12

-10

-8

-6

-4

-2

0

2

4

6

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

12/12 Growth Rate


1.8

1.9

2.0

2.1

2.2

2.3

2.4

1.8

1.9

2.0

2.1

2.2

2.3

2.4

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Retail Sales Trend

12-Month Moving Total

9

EXCLUSIVELY FOR PREMIER MEMBERS,

BENCHMARKING SUBSCRIBERS, AND MONTHLY SALES

SURVEY PARTICIPANTS

This portion of the report focuses on regional and HVACR specific economic indicators.


SOUTHEASTERN REGION T.R.E.N.D.S.

10

Industry

Summary


US Southeast Region Housing Permits totaled 333.9

thousand in the 12 months through August, up 11.3%

from the year-ago level. Slower growth in Permits are

expected to characterize the remainder of 2016 and

early 2017. Despite the changing rate of growth,

Permits will generally rise into early 2018 before a

declining trend takes hold through at least the

remainder of 2018.

Existing Home Sales in the South, a three-month

leading indicator, have tentatively transitioned to

Phase B, Accelerating Growth, signaling general

expansion in Southeast Permits into early 2017.

Slower Permit growth is present in Tennessee and

Alabama, while Virginia is in year-over-year

contraction. These areas will provide limited new

opportunities, while states such as Florida and North

Carolina are more prosperous.

Southeastern Housing Construction

Annual Trend: 333.9 thousand units Phase: C Year-over-Year: 11.3%

2016: 5.0%

2017: 9.9%

2018: -1.2%

11


What to

Watch For

Housing Permits

Virginia Housing Permits contracted 2.2% in the 12 months through August, and is the only state contracting.

Florida, Georgia, North Carolina and South Carolina are all in accelerating growth trends, the most robust

being Florida, with annual Permits rising 17.8% from the year-ago level. Although Tennessee is in a slower

growth trend, it will likely be short-lived as the quarterly growth rate is rising. Expect Permits in this area to

generally rise in 2017 and into mid-2018.

August(12/12 Annual Growth Rate)

Permits Business Cycle(12 Month Moving Total) (12/12 Annual Growth Rate)

Alabama

Florida

Georgia

Mississippi

North Carolina

South Carolina

Tennessee

Virginia

12


What to

Watch For

Home Prices

Southeast Home Prices are rising year-over-year, the most robust being Florida with Home Prices in the 12

months through June increasing 10.0% from last year. Georgia, Florida, North Carolina, and Tennessee are

all above the National average of 4.9%, while Alabama, Mississippi, South Carolina, and Virginia are lagging

below the average. Developers will be more incentivized to build homes in areas such as Georgia and

Tennessee, as home prices are increasing at an accelerating rate, subsequently increasing potential profit

margins.

2Q16(3/12 Annual Growth Rate)

Home Prices Business Cycle(3 Month Moving Average) (3/12 Annual Growth Rate)

Alabama

Florida

Georgia

Mississippi

North Carolina

South Carolina

Tennessee

Virginia

13

Forecast Summary


Annual Permits are expected to mildly decline for the remainder

of 2016, ending the year 5.0% above the 2015 level. Permits will

then rise into the first half of 2018. Contraction will take hold by

mid-2018, bringing the year as a whole 1.2% below the 2017

level.

Housing Construction Forecast

Mar-16 Jun-16

321.8 326.3to to

330.1 335.8

Result 325.1 328.5

Track Record

Annual

Construction

Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

8.2 4.0 3.5 4.8 6.3 8.6 6.8 4.2 -0.5 -2.8

9.0 5.0 4.6 5.9 7.6 9.9 8.1 5.6 1.0 -1.2

9.8 6.0 5.6 7.0 8.9 11.2 9.4 7.0 2.5 0.4

330.5 329.3 336.5 344.3 353.9 361.0 363.0 362.5 356.4 355.1

332.9 332.5 339.9 347.9 358.2 365.4 367.4 367.4 361.8 361.0

335.4 335.6 343.3 351.5 362.6 369.7 371.8 372.2 367.2 366.8

Annual Permits (Thousands of units)

Upper Forecast Range

Lower Forecast Range

US Southeast Region Housing Permits

Number of New Issuances


Annual Growth Rate (%)


14

Industry

Summary


US Southeast Region Nonresidential Construction

totaled $34.0 billion in the 12 months through

August, up 11.9% from the year-ago level.

Construction is expected to accelerate into early 2017

and subsequently grow at a slower rate into the third

quarter of 2017. Recent decline in the US Institutional

Sector Architecture Billings Index, a 20-month leading

indicator, corroborates the expected decline in

Construction in late 2017.

Southeast Education, Government, Medical, and

Retail Construction are all in accelerating double-digit

growth trends, supporting the upcoming accelerating

growth in overall Nonresidential Construction into

early 2017. Commercial Construction declined in

August, 18.7% below the year-ago level, and is a

potential risk to HARDI Sales. Ensure quality control

keeps pace with the increasing volume, as robust

growth will characterize construction into mid-2017.

Southeastern Nonresidential Construction

Historical Data: CMD

Annual Trend: 34.0 billion Phase: B Year-over-Year: 11.9%

2016: 29.5%

2017: -1.4%

2018: 7.2%

15


What to

Watch For

Nonresidential Construction

Nonresidential Construction in the Southeast is generally expanding, with the majority of the

region in Phase B, Accelerating Growth. Florida, Georgia, and Alabama are outperforming the rest

of the region as they grow by the double digits. Mississippi and Virginia are in year-over-year

contraction, but are in recovery trends. South Carolina is the only state on the backside of the

business cycle, boding well for operators in every other state in the region.

August(12/12 Annual Growth Rate)

Construction $ Business Cycle(12 Month Moving Total) (12/12 Annual Growth Rate)

Alabama

Florida

Georgia

Mississippi

North Carolina

South Carolina

Tennessee

Virginia

16

Forecast Summary


Nonresidential Construction Forecast

Results for the second quarter of 2016 fell above the forecast

range. However, internal trends signal results will fall back

within range in September. Construction is expected to rise

for the remainder of the year before generally plateauing

into the end of 2017. Construction will then rise once again

through at least 2018, ending the year 7.2% above the 2017

level. Historical Data: CMD

Forecast: ITR Economics

Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

16.8 27.2 27.5 13.3 3.4 -3.8 1.1 3.7 4.0 4.7

18.8 29.5 29.8 15.6 5.9 -1.4 3.1 6.2 6.5 7.2

20.8 31.8 32.1 17.9 8.3 1.1 5.0 8.6 9.0 9.7

33.5 35.9 35.7 35.1 35.3 35.3 37.0 37.2 37.6 37.8

34.2 36.7 36.6 35.9 36.2 36.2 37.7 38.2 38.6 38.8

34.9 37.6 37.4 36.8 37.1 37.1 38.4 39.1 39.6 39.8

Annual Construction (Billions of dollars)

US Southeast Region Nonresidential Construction

Bill ions of dollars


Annual Growth Rate (%)




## Jun-16

## 29.0to to

## 29.9

Result ## 30.3

Track Record

Annual

Construction

17


Notes:

A warmer-than-normal Summer in the Southeast led to above-average cooling demand for every state in the region. Similar demands

were also reflected in September.

Southeastern Seasonal Climate

Compared to Historical Temperatures for Heating & Cooling Demand

Below Avg Above Avg Below Avg Above Avg Below Avg Above Avg Below Avg Above Avg

AlabamaFloridaGeorgiaMississippiNorth CarolinaSouth CarolinaTennesseeVirginia

Heating CoolingSeptember Summer September Summer

18

Industry

Summary


Availability of Consumer Loans dropped off in the third

quarter as the diffusion Index fell to 56.1. However,

despite the modest pull-back in Loan Availability,

Demand for Consumer Loans hiked up in the third

quarter. The third quarter Index reading of 63.8 is the

highest since the third quarter of 2014.

The increase in Demand shows somewhat unexpected

resilience amongst borrowers, given the post-Brexit

economic uncertainty that rattled markets early in the

third quarter. The US presidential election marks one

final uncertainty hurdle for the US economy to clear

that could stunt lending liquidity in the final quarter of

the year. However, with a concluded US election and an

accelerating US economy on the horizon for 2017,

consumer credit markets should settle next year.

Consumer Credit Availability

Availably of Loans in 3Q16: DOWN Demand for Loans in 3Q16: UP

61.1

72.2

63.0 64.5 65.561.6

65.7

58.754.4

58.360.4

57.7

63.2 63.8

56.1

20

30

40

50

60

70

80

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q1620

30

40

50

60

70

80

Availability of Consumer Loans

diffusion index, above 50 means availability increasing

59.2

53.1

66.2

50.0

57.1

50.0

65.5

58.3

52.948.6

59.1 59.5

41.0

62.5 63.8

20

30

40

50

60

70

80

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q1620

30

40

50

60

70

80

Demand for Consumer Loans

diffusion index, above 50 means demand increasing

19

Industry

Summary


AHRI Factory Shipments transitioned to recovery during

the last quarter. Annual Shipments during the 12

months ending in July, at 6.9 million units, are a thin

0.2% below the same period one year ago. Shipments

over the past three months totaled 2.6 million units, up

9.1% and signaling an imminent transition to Phase B,

Accelerating Growth. AHRI Factory Shipments of

Central AC and Air Source Heat Pumps appear poised to

enter 2017 full of positive momentum.

HARDI members felt a similar shift in momentum over

the past three months as well. Average HARDI member

Sales accelerated 7.8% during the 12 months through

August, marking the fastest annual growth rate for

HARDI distributors since early 2014. However, with

Retail Sales, Housing Starts, US Private Nonresidential

Construction, and remodeling activity decelerating,

HARDI members are likely to experience economic

headwinds in the final months of 2016.

HVAC Factory Shipments

Annual Trend: 6.9 million units Phase: A Year-over-Year: -0.2%

-20

-15

-10

-5

0

5

10

15

20

-20

-15

-10

-5

0

5

10

15

20

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

HARDI Member Sales

Factory Unit Shipments

12/12 Growth Rates

Year-over-Year Business Cycles

3

4

5

6

7

8

9

3

4

5

6

7

8

9

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Shipments of HVAC Equipment Trend

12-Month Moving Total

20

Appendix—Market Definitions


National Mortgage Rates - Contract interest rates on commitments for 30-year fixed-rate first mortgages. Source: Federal Reserve Board.

National Commercial Lending Rates - Commercial paper financial 90-day interest rates. Source: Federal Reserve Board.

National Construction Inflationary Pressures - Producer price index for construction materials and components, 1982 = 100, NSA. Source: Bu-

reau of Labor Statistics.

National General Inflationary Pressures - Consumer price index for all urban consumers. US city average, 1982-84 = 100, NSA. Source: Bureau

of Labor Statistics.

Steel Prices - Galvanized steel prices (G90, 0.060 “) measured in dollars per ton. Source: Steel Market Update.

Copper Prices - Copper futures prices measured in dollars per pound. Source: Wall Street Journal.

National Home Improvement Construction - Residential additions and alterations measured in billions of dollars, NSA. Source: US Census

Bureau.

National Consumer Activity - Retail sales excluding automobiles and parts. Measured in trillions of 1982-84 (constant) dollars, NSA. Source:

US Census Bureau.

Regional Housing Permits - Total new privately owned housing units authorized for the region, NSA. Source: US Census Bureau.

Regional Nonresidential Construction - Total value of commercial construction project starts for the region, measured in billions of dollars.

Source: CMD.

Consumer Credit Availability - Net percentage of domestic respondents reporting increased willingness to make consumer installment loans.

Source: Federal Reserve Board.

HVAC Factory Shipments - Estimated amount of manufacturers’ shipments of central air conditioners and air-source heat pumps, in millions

of units. Source: AHRI.

21


Management Objectives 1 Model positive leadership (culture turns to behavior)

2 Establish goals: tactical goals which lead to strategic achievement

3 Develop a system for measurement and accountability re:#2

4 Align compensation plans with #2 and #3

5 Be keenly aware of the BE (Break Even) point and check it regularly

6 Judiciously expand credit

7 Check distributions systems for readiness to accommodate increased activity

8 Review and uncover competitive advantages

9 Invest in customer market research (know what they value)

10 Improve efficiencies with investment in technology and software

11 Start to phase out marginal opportunities

12 Add sales staff

13 Build inventories (consider lead time and turn rate)

14 Introduce new product lines

15 Determine capital equipment needs and place orders

16 Begin advertising and sales promotions

17 Hire "top" people

18 Implement plans for facilities expansion

19 Implement training programs

Phase

A 22


Management Objectives 1 Accelerate training

2 Check the process flow for possible future bottlenecks

3 Continue to build inventory

4 Increase prices

5 Consider outside manufacturing sources if internal pressures becoming tight

6 Find the answer to “What next?”

7 Open distribution centers

8 Use improved cash flow to improve corporate governance

9 Use cash to create new competitive advantages

10 Watch your debt-to-equity ratio and ROI

11 Maintain and pursue quality; don’t let complacency set in

12 Stay in stock on A items, be careful with C items

13 Consider selling the business in a climate of maximum “goodwill”

14 Penetrate new selected accounts

15 Develop plan for lower activity in traditional, mature markets

16 Freeze all expansion plans (unless related to “what is next”)

17 Spin off undesirable operations

18 Consider taking on subcontract work if the backside of the cycle looks recessionary

19 Stay realistic – beware of linear budgets

20 Begin missionary efforts into new markets

21 Communicate competitive advantages to maintain margins

Phase

B 23


Management Objectives

Phase

C

1 Begin work force reductions

2 Set budget reduction goals by department

3 Avoid long-term purchase commitments late in the price cycle

4 Concentrate on cash and balance sheet

5 Reduce advertising and inventories

6 De-emphasize commodity/services in anticipation of diminishing margins

7 Weed out inferior products (lose the losers)

8 Encourage distributors to decrease inventory

9 Identify and overcome any competitive disadvantages

10 Make sure you and the management team are not in denial

11 Cross train key people

12 Watch Accounts Receivable aging

13 Increase the requirements for justifying capital expenditures

14 Evaluate vendors for strength (don’t get caught honoring their warranties with no one

15 Manage the backlog through pricing and delivery, try to fill the funnel

24


Management Objectives

Phase

D

1 Continue force reduction

2 Reduce advertising – be very selective

3 Continue to avoid long-term purchase commitments

4 Review all lease agreements

5 Increase the requirements for justification of capital equipment

6 Eliminate all overtime

7 Reduce overhead labor

8 Combine departments with like capabilities and reduce management

9 Select targets of opportunity where price will get the business

10 Tighten credit policies – increase scrutiny

11 Look for opportunistic purchases

12 Grab market share as your competitor dies

13 Prepare training programs

14 Negotiate union contracts if possible

15 Develop advertising and marketing programs

16 Enter or renegotiate long-term leases

17 Look for additional vendors

18 Consider capital expenditures and acquisitions in light of market-by-market potential

19 Make acquisitions – use pessimism to your advantage

20 People will be scared – lead with optimism and “can do” attitude

25

Southeastern Region - HARDIhardinet.org/wp-content/uploads/2016/10/HARDI... · nars, monthly issues...

Documents

Transcript of Southeastern Region - HARDIhardinet.org/wp-content/uploads/2016/10/HARDI... · nars, monthly issues...