During this long-running economic expansion, the one word that economists keep repeating over and over is “sustainable.” Is this sustainable growth? Does the Federal Reserve need to make further adjustments to maintain sustainable growth?

And despite economists’ worries, we continue to experience relatively rapid growth, very low unemployment, and a modest inflation rate. What’s going on here?

A better key word at this time, for the hvacr industry and industry at large, may be momentum. The economy has built up a full head of steam and no amount of tinkering by the Fed is going to put out the fire.

Some signs of a slowdown have presented themselves but they’ve always been accompanied by signs of even greater growth. For example, the Air-Conditioning and Refrigeration Institute (ARI) reported that April unitary air conditioner shipments were down slightly, followed by May shipments that were equal to last year.

No slowdown

It looked like a slowdown was imminent. But then the recently reported June unitary shipments set a new one-month record, totaling 963,429 units. The year-to-date total is 10% ahead of last year, the industry’s best year ever. This is not a slowdown.

Statistics from the Gas Appliance Manufacturers Association (GAMA) in this issue show that residential heat equipment shipments, through April, are quite healthy as well. Most segments show increases over 99 and some, like fireplaces, are up substantially.

Housing starts through June are virtually the same as last year, just 1% down. Building permits, however, are down 5% and this could lead to a slower pace for the last half of 2000.

But in come replacements to the rescue. Honeywell’s Economic Outlook notes that “the replacement business could allow the industry to realize yet another record year.” Replacements are expected to remain strong through next year.

No moderation

Gross domestic product (GDP) was expected to moderate in the second quarter. Instead it grew a full percentage point faster than expected, with inflation actually falling rather than rising. And most recently, the Labor Depart-ment announced that productivity accelerated to a 5.3% annual rate for the second quarter, compared to 1.9% in the first quarter, while labor costs dropped.

All these remarkably positive numbers have led some to theorize that the widespread use of computers and the Internet has put us in a “new economy.” The application of new technology has enabled us to boost productivity and lower costs.

The Internet boom may have altered our economic playing field and raised the level of what is sustainable growth. Certainly, if we keep achieving “unsustainable” growth quarter after quarter, somebody’s definition is going to have to change.

In the meantime, the hvacr industry is doing quite well, thank you, and it looks like we’re in for more wellness.

Publication date: 08/21/2000