ARLINGTON, Va. - Did you hear the champagne corks popping? Manufacturers of central air conditioners and heat pumps set a single-month record this June of more than one million shipments - 1,081,147 to be exact.

Growth in the U.S. economy is helping to fuel the momentum, said Ed Dooley, vice president of communications and education for the Air-Conditioning and Refrigeration Institute (ARI). Housing starts, though a little slower than last year, are still strong. But the main reasons for the strong performance, Dooley said, are the healthy replacement market and the sophistication of the contractors serving it.

"Contractors are better now at selling comfort," he said, "and that includes features that range from filtration to programmable thermostats. With this emphasis on comfort and service contracts, the consumer feels more confidence in the advice they get and are more willing to replace their older units."

Last year's heat and "the early hot weather in April and May in some parts of the country also helped spur consumer interest," Dooley said. "Last year's hot weather helped as people weighed prospects of their units failing during a heat wave."

"Of course, the improved economy helps greatly, too," Dooley said. "The current slowdown in the employment picture is troubling, but with a 3- to 4-percent growth rate in the economy, we can expect a very good year for U.S. shipments, with a new record and the first year ever over 7 million units."

The Fuel

It has long been acknowledged that the HVAC unitary market is more affected by replacements of existing units than by the installation of new ones. Both areas have been supported this summer by consumer confidence, which rose for the fourth straight month in July, Dooley pointed out, hitting the highest level since June 2002.

Housing starts cooled in June from what experts considered an unsustainable rate, Dooley said.

On June 30, the Federal Reserve Board raised short-term interest rates to counteract inflation. Still, 30-year fixed mortgage rates remained unexpectedly below six percent through July, Dooley pointed out. "Buoyed by strength in the first five months, single-family housing starts are likely to achieve an all-time high in 2004, surpassing last year's record of 1.499 million units."

More than 87 percent of new U.S. homes are built with central air, the institute reported.

"Although the industry benefits from a strong new housing market, it is affected more by the installed base of more than 70 million units," ARI stated.

"The industry is in the enviable position of shipping most of its units as replacements for aging air conditioners," Dooley said, "and as upgrades for remodeling projects spurred by mortgage refinancing or existing home sales."

The Numbers

According to ARI's figures, factory shipments for residential and light commercial units soared 14 percent above June 2003, which set the previous record of 946,416 units. This year's numbers included 236,433 heat pumps, "a new single-month record in that category and a 24-percent increase over last June," Dooley said.

The year-to-date total of 1,028,000 is up 18 percent from the January-June period in 2003.

At the current pace, shipments of central air conditioners and heat pumps this year could approach 7.3 million units, plus exports of more than 600,000 units, which would eclipse the annual record of 6,807,262 set in 2003.

Sidebar: Gazing Back

Looking back at U.S. unitary shipments, ARI notes the following:

In 1984, the industry shipped 3.3 million units for domestic use in a year when 30-year fixed mortgage rates averaged 13.9 percent.

In 1974, shipments totaled 2.4 million and mortgage rates averaged 9.2 percent.

In 1964, central air conditioner shipments totaled 684,336.

In 1953, central air shipments totaled 127,000 units.

Publication date: 08/16/2004