A Look Ahead to Heating Season

BY Tim Fisher
9/17/2020 - HVAC Market Intelligence

Key Takeaway: Above normal temperatures are expected around the country this winter, but countervailing forces could still make this heating season a good one for the industry.


The results are in and it’s now official: this summer was the hottest on record for the Northern Hemisphere,[1] while the Southern Hemisphere experienced its third warmest winter ever. As the industry turns the page on what has mostly been a great summer, how do climate and temperature projections look for this heating season?

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The map on the left displays temperature probabilities for October through December, while the map on the right shows temperature probabilities for January through March. Based on the current outlook, the entire U.S. is projected to experience above normal temperatures for the remainder of 2020 with only moderate improvements in January – March. The exception here is in the northern portion of the continental U.S. and southern Alaska, where NOAA projections indicate an equal chance for the northern U.S. to experience above or below normal temperatures in the early months of 2021.

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Despite the warmer-than-normal NOAA projections, there are reasons for optimism as we move into the cooler months. The chart above shows national sales growth of furnace and boiler units for the most relevant months (October – March) going back to 2014. Although sales of heating equipment are generally correlated with the number of heating degree days in each month, that relationship does not always hold. From 2014 through the early part of 2016 (as the red circle in the graph above shows), the number of HDDs in each month had little bearing on demand for heating equipment (and often exhibited a negative relationship). While a more positive monthly relationship between the two variables took over from 2016 onward, we have clear evidence that milder winters don’t necessarily mean weaker sales.

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In recent editions of the Green Shoots Weekly we argued that the strong residential demand this summer was enabled, despite double-digit unemployment, by the relative insulation of homeowners from the worst effects of the recession. Most homes are owned by households making more than $75,000, and employment levels for individuals making more than $65,000 annually had returned to normal by early-June. Recent survey results from the Census’ Household Pulse Survey reinforce the notion that homeowners were largely insulated from the crisis, with 51 percent of respondents indicating that they or a member of their household began working from home because of the pandemic. The ability of many homeowners to work from home is a prime reason why the Leading Indicator of Remodeling Activity – an indicator offering a short-term outlook of national home improvement and repair spending – shows continued growth in remodeling activity through Q1 of 2021.

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The LIRA last exceeded 4 percent growth in the fourth quarter of last year when ~ 1.1 million furnace and boiler units were sold – a relatively strong quarter despite above normal temperatures and a down winter overall. Could it happen again? With homeowners expecting to telework for the foreseeable future and easy 2019/20 comps, this heating season is looking like it could be a good one for the industry.

[1] https://www.noaa.gov/news/northern-hemisphere-just-had-its-hottest-summer-on-record


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