May's Data Driven Newsletter started with my "glass is half-full" review of the first calendar quarter of 2020. Since then we have learned the following:
- TRENDS April 2020 – the average HARDI distributor experienced a sales decline of 19% during April of 2020 versus April 2019
- AHRI April shipment report – April 2020 shipment declines vs April 2019: Resi water heaters down 15%, Gas furnace down 42.5%; Air conditioners down 18.6%
- US unemployment rate for May 13.3%, up from less than 4% during the first quarter of 2020
- US GDP for the second quarter forecast -30% to -40% area.
Looking back at those data points does not change my "glass is half-full" interpretation of the performance year to date, despite the exogenous shock to our economic system. Want what I'm drinking? Keep reading.
April Shipments - 22%
The AHRI April 2020 Shipment Report indicates shipments of furnaces, air conditioners and heat pumps declined by 226,000 units or 22% versus shipments during April of 2019. The performance of this one month is not indicative of the likely results for 2020.
AC shipments declined by 90K or 18.6% from April 2019, but shipments increased by 31K or 6% in March ahead of the COVID market uncertainty. AC shipments for March and April 2020 combined declined by 5.9% or 59K units versus March and April 2019. 59K could be made-up during May-June-July when 2 million units are typically shipped and the cooling degree day comparisons will be relatively easy across much of the country this summer. 2020 year-to-date AC shipments of 1.58 million units will typically account for 30% of the annual activity. If that pattern persists in 2020, then there would be 5.2 million units shipped during 2020 after 5.3 million during 2019. The 14% Unemployment Rate versus 4% last year could easily trim demand by 10% or to 5 million units. The cooling degree days and progress getting back to work will dictate how far we vary from a 10% decline, but an AC shipment decline for the year near 20% like was experienced in April is very unlikely.
Heat pump shipments were down by 71% or 18K fewer units were shipped during April of 2020 versus April of 2019. Heat pump shipments for March and April combined are down 2% or 11.5K. We have seen 1 million heat pumps shipped year-to-date. The first four months of the year typically generate 33% to 34% of annual shipments. If that balance persists in 2020 then heat pump shipments will be flat-to-up for the calendar year. That seems a little optimistic given the elevated unemployment rates and difficult weather comparisons in the Southeast this year, but it would be impressive after enduring an economic coma.
Furnace shipments were responsible for more than half of the 226K unit decline during April 2020. April 2020 furnace shipments were down by 43% versus April of 2019, and 34% below the average number of shipments we have seen recently for April. To a certain extent the decline is understandable after the lousy heating season, and April is responsible for the fewest number of annual furnace shipments. The comparisons should improve if residential construction activity improves.
HVACR distributors experienced a 19.2% sales decline during April 2020 as reported in HARDI’s latest TRENDS report. Like the shipment report, one month’s performance is not indicative of the overall health or prospects of the market. Click here for Trends in 2 Minutes to see how the regional performance during the month was encouraging and why the scary headline is heavily influenced by the comparison to an extraordinary April 2019 report.
COVID-19 uncertainty persists, as does the certainty that cooling season is arriving. Most of the April decline was due to furnace shipments during the lowest month of annual demand for the product after a weak heating season. Air conditioner and heat pump demand during March and April combined was surprisingly good given the challenges in the marketplace. The year is off to a good start considering the uncertainty, so I think the “glass is half full.” The May report will be informative. AC should be strong after the soft April and the comparison is not challenging. Heat pump shipments will be challenged to match May of 2019 when there was nearly 60% more cooling degree days than normal in the important Southeast region. May 2020 has two fewer billing days than May of 2019 and that will distort the TRENDS headline for the month and could be a drag on the shipment report. June 2020 has two extra billing days than June 2019. By then we will know if my glass has been half full or half empty.
If you have any questions, or would like to suggest a featured topic for next month's DDN, contact Brian Loftus at firstname.lastname@example.org.