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Industry Indicators Remain Stable, Construction Struggles

July 19, 2010
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According to recent reports from industry associations, the economic outlook remains stable and continues to show signs of recovery. However, other sources of construction data reported declines in both the residential and commercial markets.

According to the Air Conditioning Contractors of America (ACCA), its Contractor Comfort Index (CCI) for June 2010 was up one point over May. The CCI is a measure of contractor attitudes toward short-term economic growth.

The June index was 69, up from 68 in May. Since the CCI was first calculated in February 2010, the index has gone up 25 percent.

The CCI is calculated based on a survey of the association’s contractor members, who are asked how positive they feel about new business prospects, existing business activity, and expected staffing decisions in the short-term future. According to ACCA, when weighted and averaged into one number, a CCI of 50 or above reflects anticipated growth.

In addition to the positive contractor report, distributor sales were up in May. The Heating, Airconditioning, and Refrigeration Distributors International (HARDI) reported that North American sales for the month of May were up nearly 8 percent from last year. This marked the third consecutive month in which overall distributor sales were up from the previous year.

HARDI’s economic report stated, “While sales for the average HARDI member are still 5.4 percent below their year-ago level, the upward trend suggests ongoing improvement in the sales climate as we move through the summer months.” Additionally, the majority of HARDI members reported higher inventory levels in May, which was the first such occurrence since December 2008.

When broken out by region, distributor sales were up everywhere except for the West. Noting that the data for the Western region has been erratic so far in 2010, HARDI’s chief economist, Alan Beaulieu of the Institute for Trend Research, commented, “Oregon and Washington had a horrible month for housing permits in May, with April to May declines of 16.9 percent and 11 percent, respectively.” Yet overall, according to HARDI, most distributors are seeing continued signs of recovery.

Other general reports for May were not as positive. Residential data revealed that sales of new homes were down nationwide. According to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new single-family houses fell 33 percent in May.

In addition to the lackluster report from the residential market, the U.S. Census Bureau also reported that nonresidential construction spending decreased slightly in May.

According to Anirban Basu, chief economist for the Associated Builders and Contractors (ABC), “The level of construction spending in May hardly changed from the prior month, and April represented an improvement over March. However, for the most part, [this] report should be viewed as further indication that the U.S. economic recovery continues to stall.” Basu noted that construction spending growth is still dominated by publicly financed projects, and private financing for construction has not returned.

Publication date: 07/19/2010

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