I am here to report that the HVAC business community has put the phrase “cautiously optimistic” behind them.
I travel a lot in this job and have the opportunity to meet with people all along the HVAC chain. Ever since the great crash of 2008, when I asked people how they see business going in the next 12 months, they inevitably told me that they were cautiously optimistic. Well, that is not entirely true as during that first year everyone was either depressed, mad, or defeated.
But the industry has seemed to have turned the corner and is genuinely optimistic. That means good things for distributors for the end of 2013 going into 2014 as the numbers are backing up what people are saying.
For one thing, the metrics of the industry have not been this high in a while. The Air Conditioning Contractors of America’s (ACCA) Contractor Comfort Index (CCI) reached a score of 77 in both May and June — the highest number in the index’s three-year history, and nine points ahead of June 2012’s 68. A CCI of 50 or above reflects anticipated growth. I am sure every distributor loves hearing that the contractor is gearing up to buy more product.
Also, in June HARDI reported a 5.9 percent increase in revenue for its members over June 2012. So your peers are having good results.
In addition, the Air-Conditioning, Heating and Refrigeration Institute’s (AHRI) data on shipments of central a/c and air-source heat pumps, warm air furnaces, residential storage water heaters, and commercial storage water heaters all showed increases when compared to data collected in 2012. Highlights include a 13 percent increase in commercial gas water heaters in July, and a 22 percent increase in gas warm air furnaces in the same month.
Everything I have been hearing was backed up by the results of the 2013 McGladrey Distribution Monitor Report from the National Association of Wholesalers which crossed my desk recently.
Of those surveyed, 79 percent of executives are expecting an increase in net income over the next 12 months. In fact, it is anticipated that there will be an average of 16.3 percent increase. And in looking back, 76 percent of distributors had an increase in U.S. sales over the past 12 months.
This information is translating into hiring. A total of 63 percent of distributors said they will be increasing employment in the next 12 months, while just 8 percent of distributors said they will be reducing their workforces over that same time period.
However, the study did show that the economy was not all peaches and cream. While 32 percent said they were “thriving” some were not as pleased. Despite weathering that recession, distribution executives were not satisfied with the results as they have not yet gotten back to the prerecession levels.
There was also a legitimate concern that there might be a few headwinds that can slow this recovery down. One that kept on appearing is government getting in the way. As the executive summary stated, “On one hand, growing demand spurs executives to invest in new information technologies and capital equipment. On the other hand, political indecision and uncertainty over new regulations undermine executive confidence and limit hiring and expansion.”
“For the wholesale distribution industry, there are a number of issues before Congress that could have an impact on industry: marketplace fairness legislation, health care and tax reform, and a range of new workplace regulations. Business should keep a close eye on the outcomes of reforms and debates in Congress,” said Patrick Larmon, of Distribution USA and NAW Chairman of the Board.
Also, those that are hiring were worried about the quality of employees that they could find. The report said 36 percent of distributors rarely find the skilled talent they need.
But take a minute to think back to where you were four years ago or even two years ago. We are in a significantly better place.
It is real easy to find the negative, and say to yourself, “The economy is not growing as fast as other recoveries. Despite the high unemployment, I can’t find a good worker. Health care cost will keep soaring, and I am not sure what is required of me from Obamacare.”
But as a leader you need to fight that urge. A positive outlook will help morale around the office and put you in a much better frame of mind.
And at the end of the day, we can all be happy we don’t need to say “cautiously optimistic” anymore.
What does your crystal ball say? Continue this discussion on our Facebook page at www.facebook.com/DistributionCen.