Many Positives for 2015 HVAC Market

All the economic indicators point to a positive HVAC market in 2015, although there are a couple of interesting anomalies. Dale Stroud, senior director of marketing and offerings at Uponor Inc., recently reviewed the leading economic indicators with the ContractingBusiness.com staff, and all of them were up, but one.

The economy has added back 8.5 million jobs, making up for the 8.5 million jobs lost in the Great Recession.

 

Housing starts have more than doubled since the bottom in 2009, and are now up to around 1.2 million units. Builder optimism, as measured by the Housing Market Index, is back up above 50; in 2009 less than 10% of builders were optimistic. (A number of market indicators have 50 as the benchmark, except for the Conference Board’s Consumer Confidence Index, which uses 100 as the baseline.) The AIA Architectural Billing Index is back up above 50. The Remodeling Market Index is well up above 50, from a low of 22 in the fourth quarter of 2008. The economy has added back 8.5 million jobs, making up for the 8.5 million jobs lost in the Great Recession.

Being in the right place at the right time is an important part of capitalizing on this part of the cycle.”

 

The one outlier of all these indices, however, is the Consumer Confidence Index, which is lagging below its benchmark 100 level. The other anomaly is in the type of construction underway today, as noted by prominent consulting firm FMI in its 2015 “U.S. Markets Construction Overview.”

“This particular recovery is the first in the modern history of the United States not to feature housing as the recovery leader,” FMI noted in the report. “That in itself is unusual and may be part of the reason why this recovery is so irregular. Housing is, of course, recovering, but at a slow rate and from a very low base. The erratic nature of this recovery means that some geographies are doing much better than others, as are certain vertical markets. Being in the right place at the right time is an important part of capitalizing on this part of the cycle.”

Associated Builders & Contractors Chief Economist Anirban Basu confirmed the strength in the nonresidential market.

“ABC forecasts nonresidential construction spending will expand by roughly 7.5% next year,” said Basu. “The segments that will experience the largest growth in construction spending in 2015 include power, lodging, office space, and manufacturing.

“The public sector will see far more sluggish growth in construction spending,” Basu warned, which fits a pattern.

Legislative Loggerhead
The economy will cooperate in 2015, but government agencies will not, says Paul Stalknecht, president/CEO of Air Conditioning Contractors of America, writing in ContractingBusiness.com’s sister publication, HVACR & Hydronics Distribution Business.

“And while the change in the makeup of Congress means we can expect to see a pro-small-business agenda, the real threat to contracting businesses will come from the government agencies,” Stalknecht wrote. “We can expect to see a tidal wave of controversial federal regulations directed at small business during the lame duck years of the Obama Administration. The Occupational Health and Safety Administration, the National Labor Relations Board, the Department of Energy, the Environmental Protection Agency, and other agencies have proposed rules teed up and ready to go.”

Additionally, look for the decisions in five cases granted certiorari by the U.S. Supreme Court involving employment, labor and discrimination laws, he said.

So what can contractors do? Focus on the things they can control, Stalknecht advised.

“That means focusing on strong business practices, providing education and training opportunities to their teams, and getting involved,” he said.

That’s good advice, which will serve contractors well, no matter what the year.