5 Trends in the HVAC Industry
I have given multiple presentations recently on the outlook, including for the HVAC industry. I noted several trends:
- A Worsening Deficit: Throughout manufacturing, foreign trade continues to depress U.S. economic growth. In 2015, for every $1 of HVAC exports, the U.S. imported $1.80 in goods (up from $1.50 in 2013). HVAC’s trade deficit has been steadily worsening since 2009, reaching $6.25 billion in 2015.
- Modest Gains in Employment: HVAC employment closely tracks employment growth in the manufacturing sector. As of 2015, HVAC has gained 4,200 jobs from its trough of 124,600 jobs in 2010. The industry accounted for about 1% of manufacturing jobs last year.
- A Lift From the Construction of Buildings: The vagaries of the construction sector have significant implications for HVAC growth. We’re still seeing strong—but decelerating—construction activity for buildings. We forecast solid growth of 12% for commercial and institutional building construction in 2016.
- A Mixed Bag in Investment-Related Manufacturing Production: We forecast a decline of 4% in investment-related HVAC manufacturing production this year, to be followed by growth of 6% in 2017 and 4% in 2018. Although the construction outlook is bright, most of the demand comes from replacement rather than new construction. Unfortunately, firms are risk-averse and are repairing versus replacing HVAC systems.
- Negative Momentum: As I noted in my recent U.S. Industrial Outlook, HVAC production is showing very negative quarter-to-quarter momentum. Production was down 2% during February to April 2016 relative to the same period in 2015. Within the business cycle, HVAC is currently in a position of decelerating decline.
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