What a crazy summer. I don't know about the rest of you, but I'm exhausted. Yeah, right — like I know what it's like to be working 18-hour days crawling aound in hot attics and dealing with irate customers who don't understand why their broken air conditioners aren't at the top of your repair list.
Being in the contracting business in summer can be crazy, but from a business standpoint, that's a good thing, right?
Speaking of crazy, take a look at a recent study that paints a most rosy picture for our industry over the next three years. The study was conducted by JP Morgan Equity Research and released on July 6th. The 148-page HVAC Market Outlook study provided the following "key" conclusions:
- The residential sector is showing a strong recovery this year with potential for double-digit growth through 2013.
- The commercial sector is on the brink of turning the corner within the next year with greater potential than residential.
- The legislation leading to the switch to R410-A and the new regional efficiency standards (if formally passed) will fuel much of the anticipated growth.
Can this be true? Oh happy day!
Hold on — Our good friends at the Heating, Airconditioning, and Refrigeration Distributors International (HARDI) shared with me some of their initial thoughts on this report. In a nutshell — they think it's overly optimistic.
According to the HARDI summary of the survey results, if the residential growth predicted in the study is true, it would surpass the spurts from the heyday of business in 2005. That would be awesome if equipment shipment figures provided by Air Conditioning, Heating, and Refrigeration Institute (AHRI) backed it up. They don't.
In addition, the HARDI commentary highlights the negative impact of ending tax incentives on residential equipment sales. Higher price tags for high efficiency systems also don't bode well for increased sales, should the incentives go away.
Then there's the regional standards debate. HARDI says Federal minimum efficiency standards in 2006 had a "net negative impact" in terms of unitary shipments, raising questions about JP Morgan's outlook if higher, regional standards are enacted.
In their summary, HARDI writes, "HARDI has repeatedly expressed to the U.S. Department of Energy concerns over the long term negative impact increased minimum standards could have on energy efficiency incentive programs which have played a significant role at improving the mix of high-efficiency unitary sales."
Good points. From HARDI's summary and my own thoughts, the following must happen before we can be so optimistic:
- Extend the residential tax credits. HARDI recomends a three-year extension. I say it should be at least three years — more if the economy continues to stall.
- Make programs like Home Star and Building Star a reality and make sure the requirements are fair to contractors and consumers.
- Fix the credit crunch. Business works around the ability to borrow to fund growth. This is true in both the residential and commercial markets. Tight credit hurts business.
- Enough with efficiency standards already. Focus on high efficiency policies already enacted, and create an environment where utilities can work more with consumers to buy new systems.
- What about the depreciation debate on commercial HVAC systems? Isn't it time to bring that back to reality and make a more reasonable depreciation time line?
Every day the papers and financial news report on the precariousness of this economic recovery. We always talk about the idea of not particpating in the recession, but you still need to be proactive to make sure that legislation helps your business, not hurt it. My suggestion: work through trade associations to help bring pressure on the legislative end. It also helps to attend industry events, like HVACR Week (hvacrweek.com), so you can network with peers and stay on top of the craziness. HVACR Week is coming soon, so be sure to register today.