All signs point to a robust 2015

This is going to be a good year. The general economic indicators point to a much better economy, and our interviews with leaders in the plumbing and hydronic heating industry specifically point to a strong 2015. Moreover, we conducted our interviews before the news broke that Q3 GDP was revised upward to 5% and that 321,000 jobs were created in November.

“Our members — in both service and repair and new construction — report they are very busy these days, and they expect more work to come in the next few months,” said Kevin Tindall, president of Plumbing-Heating-Cooling Contractors – National Association, as well as president of Tindall & Ranson, Princeton, N.J. “The latest reports about job growth and rising wages, along with lower fuel prices, should have a positive effect on the construction industry, as customers may have more money to spend on projects. Although an expected rise in short-term interest rates could slow the pace of growth in the coming months, we still expect a good year.” 

The leading economic indicators are all up, Dale Stroud, senior director of marketing and offerings at Uponor Inc., told CONTRACTOR.

Housing starts have more than doubled since the bottom in 2009, now up to around 1.2 million units, Stroud noted. The inventory of unsold homes has sunk down to its “normal” range of anywhere between four and six months. Builder optimism, as measured by the Housing Market Index, is back up above 50; in 2009 less than 10% of builders were optimistic. (A number of market indicators have 50 as the benchmark, except for the Conference Board’s Consumer Confidence Index, which uses 100 as the baseline.) The AIA Architectural Billing Index is back up above 50. The Remodeling Market Index is well up above 50, from a low of 22 in the fourth quarter of 2008. The economy has added back 8.5 million jobs, making up for the 8.5 million jobs lost in the Great Recession.

According to Carl Pinto, director of marketing at Bradford White Corp., the repair and replacement market is still doing well, and there will be continued growth in the multi-family segment of new construction.

“All projections and feedback from the field suggest that we will be on par or slightly better than last year in the repair and replacements market,” said Pinto.

In 2015, the commercial market will likely be stronger than the residential market, said Mike Juhnke, product program manager at Lochinvar Corp.

“One insight that we have from Lochinvar University is that we bring in student and contractor groups from around the country so we get a lot of perspectives,” Juhnke noted. “And in talking to them we’re hearing about a lot of energy upgrades going on and that there is a lot more private money being invested. That’s what makes people optimistic. We had been getting work from government, schools and universities, but now guys are coming in saying that they have hotels or hospitals or a guy is upgrading a retirement home to condensing boilers. Over the last nine months, the majority of their work is private money. These are conversations, not data, but say you have 12 engineers in a room and you ask them, and it used to be that only 10% of them would say that they were getting private money a year ago.”

The fly in the ointment will be the federal government, said Paul Stalknecht, president/CEO of Air Conditioning Contractors of America, writing in our sister publication HVACR & Hydronics Distribution Business.

“And while the change in the makeup of Congress means we can expect to see a pro-small-business agenda, the real threat to contracting businesses will come from the government agencies,” Stalknecht wrote. “We can expect to see a tidal wave of controversial federal regulations directed at small business during the lame duck years of the Obama Administration. The Occupational Health and Safety Administration, the National Labor Relations Board, the Department of Energy, the Environmental Protection Agency, and other agencies have proposed rules teed up and ready to go.”

Stalknecht advised contractors to focus on the things they can control.

“That means focusing on strong business practices, providing education and training opportunities to their teams, and getting involved,” he said.

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