Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR average distributor sales for July 2011 up 4.9% from the same month last year, a decline from last month’s 6.8% growth.

July marked the fifth out of the last six months in which the annual distributor growth rate declined. HARDI’s monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) report showed growth in five of seven U.S. regions, only one that experienced double digit improvement compared to July 2010. Canada, however, had its best month of the year up over 10%, a sharp contrast to US distributor sales average of 4.8%.

Inventory levels were up in every North American region for the third consecutive month. Days Sales Outstanding (a measure of how quickly customers pay their bills) finally retreated under 50 days after five months of consecutive increases. Last month’s strong 30% increase in distributor productivity reflected by sales per employee backtracked by nearly 10% as July sales failed to meet distributor expectations.

"The West Region has consistently reported weaker sales growth in 2011 than the other HARDI regions. The slower growth in the West is likely due to the relatively higher foreclosure rates and falling home prices that are depressing the housing markets in that area. Home foreclosure rates in Arizona, California and Nevada are at more than 1 in every 300 homes, versus the 1 in 600 homes average for the US. We expect the diverse set of housing market dynamics across the US and Canada to continue to play a role in future distributor sales this year," said HARDI economist, Andrew Duguay of the Institute for Trend Research (ITR).

"July shows a shift in growth away from the Northeast and Mid-Atlantic to the middle of the country," said HARDI Executive Vice President and C.O.O. Talbot Gee. "Unfortunately 2011 is shaping up to meet our forecast of modest growth and eroding margins on average, however those who are doing it right are starting to separate farther from the pack." HARDI has already begun advising members to quantify the impact the $1,500 tax credit expiration last year had on fourth quarter sales since Q4 2011 is likely to significantly lag.

"July’s unitary sales data continues the monthly rise in R-22 unit sales but perhaps more enlightening is that overall unitary sales are effectively flat with this time last year," said Gee. "Unitary sales volumes are not growing and may even fall below our forecast for 2011."

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