Southeastern Region

Southeastern RegionAlabama, Florida, Georgia, Mississippi, North Carolina,South Carolina, Tennessee, VirginiaOctober 2016Prepared by:ITR EconomicsManchester, New HampshireReproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted byHeating, Air-conditioning & Refrigeration Distributors International.

Reproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.

Thank you to the following HARDI Sustaining Members whose support helps make this report possible: Alltemp Products Co. LTD Heat Transfer Products Group Sauermann NA Corp Arzel Zoning Technology, Inc. Holyoke Fittings Inc. Seal-Tite, LLC C&D Valve International Comfort Products Site-Seeker, LLC CPS Products, Inc. JMF Company Snappy Centrotherm Eco Systems Khauf Insulation GmbH Superior Radiant Products, Inc. CertainTeed Corporation Martin Walshin, Inc. TACO, INC. Columbus/TPI HVAC Division Metal-Fab, Inc. Trion Continental Industries, Inc. Mortex Products, INC. Ventamatic, Ltd. Cooper-Atkins, Corp. National Compressor Exchange Wells Fargo-CDF E.V. Dunbar Co. Owens Corning White-Rodgers Embraco Panasonic Eco Products Division Williams Comfort Products EWC Controls, Inc. Rawal Devices Golden Refrigerant Reflectix, Inc. Haier America Research Products Corporation Harris Products Group RSESReproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.

Make Sure Your Company is Ahead of the T.R.E.N.D.S.!HARDI is excited to offer our latest member benefit in partnership with Alan Beaulieu and the Institute for ITR Economics:T.R.E.N.D.S. Includes: Monthly HVACR distributor total sales reports Quarterly HVACR specific analysis of economic indicators broken down by HARDI region and major market service areas across the United States Major economic indicators correlated with HARDI members’ aggregated sales data Management recommendations from Alan Beaulieu and ITR for each economic trend specific to each HARDI regionHARDI Distributors who Contribute Monthly Sales Data Receive: Free access to all Monthly Sales T.R.E.N.D.S. reports Free access to all detailed and HVACR-specific regional quarterly economic forecasts and webinar programs Non-participating distributor members will NOT receive any of these reports or forecastsHARDI Premier and Sustaining Supplier Members: Become a Premier HARDI member for an additional 3000 and be the only one to receive the Monthly Sales T.R.E.N.D.S. Reports (including special recognition in each report), all of the complete quarterly economic forecasts for each HARDI U.S. region, free access to HARDI’s quarterly economic forecast webinars, monthly issues of the exclusive HARDI TRENDS Manufacturing Optimization Report, and a complimentary booth at the Annual Conference Booth Program Become a Sustaining HARDI member for an additional 2000 and be the only one to receive the Monthly Sales T.R.E.N.D.S. Reports (including specialrecognition in each report) and a complimentary booth at the Annual Conference Booth ProgramNon-Premier or Sustaining Supplier Members will NOT have access to any of these benefitsAll HARDI Members Receive: Reduced member-only pricing on ITR’s company-specific Executive Vantage Point Analysis For more information or questions, please contact Brian Loftus at (888) 253-2128 or bloftus@hardinet.orgReproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.

Table of ContentsEconomic Overview . 1National Mortgage Rates . . 2National Commercial Lending Rates . . 3National Construction Inflationary Pressures. . 4National General Inflationary Pressures . . 5Steel Prices . 6Copper Prices . 7National Home Improvement Construction . 8National Consumer Activity . 9Regional Housing Construction . . 11Housing Permits by State . 12Median Home Prices by State . 13Regional Housing Construction Forecast . . . 14Click Here for a Brief Explanation of How to Read the ReportReproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.

Table of ContentsRegional Nonresidential Construction . . . 15Nonresidential Construction by State by Value . . . . 16Regional Nonresidential Construction Forecast . . . 17Cooling & Heating Demand by State . . 18Consumer Credit Availability . 19HVAC Factory Shipments . 20Appendix . 21Management Objectives . 22Click Here for a Brief Explanation of How to Read the ReportReproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.

Economic OverviewWhen reading the news about the struggling US industrial sector, it iseasy to become lost in pessimism. However, the upcoming year will be abetter year than 2016, as the economic fundamentals and leadingindicators point to expanding US business-to-business activity, risingglobal demand, and a strong US consumer. Average US IndustrialProduction for the past 12 months, down 1.3% from one year ago, ishampered by contraction in the Mining and Utilities components.However, the quarterly growth rates for US Mining Production and USElectric and Gas Utilities Production, the two laggards of US IndustrialProduction, are rising. Recovery in these components in the comingmonths will support an imminent transition to a recovery trend within USIndustrial Production. This is corroborated by the general rise in the rateof-change for the US Total Industry Utilization Rate. We expect a risingtrend in annual Industrial Production to take hold by late 2016 andsubsequently rise through 2018, as the headwinds facing the commoditydependent segments of the US economy fade, allowing for positiveconsumer trends to drive growth.Consumers are supporting US Real GDP growth while the industrial sideof the economy wanes. Annual Personal Consumption Expendituresreached a record 12.6 trillion, driven by rising wages that outpaceinflation and a record-high level of Private Sector Employment. Risingincomes, rising employment, and low interest rates are contributing tothe growth in consumer spending; US Total Retail Sales Excluding GasStations (deflated) are up 3.4% on a year-over-year basis. Expectconsumer spending to pick up in 2017 as the macroeconomy grows.Private Nonresidential Construction has been growing at a slower pacesince March and slowing growth will persist into late 2017. The rate ofgrowth in US Warehouse Buildings Construction, which is up 17.4%, willbegin to slow by the end of 2016. Despite the slowing rate of growth, thisUS Industrial Production Index 0'07'08'09'10'11'12'13'14'15'16'17'18'19market will provide growth opportunities for sales, as consumersincreasingly shift purchases to online stores, requiring new distributioncenters to be built. US Total Manufacturing Production is in a slowergrowth trend, which is hindering growth in US ManufacturingConstruction.The upcoming recoveries in US Industrial Production and business-tobusiness activity will support growth in 2017 in many segments thatHARDI members operate within, benefitting sales in 2017. Plan forincreasing economic activity next year by hiring, training, and retainingemployees now in preparation for increasing demand. Also, considerundertaking capital expenditures at today’s low interest rates, if yourbalance sheet permits, to prepare for growth next year. Next year isgearing up to be a promising year for the economy and for sales growthopportunities; do not get caught on your heels when demand begins topick up. Be proactive in your planning and budgeting to be there for yourcustomers and fulfill orders both on time and with top quality.Reproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.1

National Mortgage RatesRate: 3.46% for 30-Year FixedPhase: AMonth-over-Month: -11.1%Mortgage Rate TrendMonth-over-Month Business CycleMonthly Data1/12 Growth -30-30'07'08The average National Conventional 30-year MortgageRates closed September at 3.46%. While this marks a 43basis-point decline from September 2015, 30-year Ratesbegan settling higher recently after bottoming out at3.44% in July. The tentative upward movement in Ratesis barely perceptible at this point, but could gain steammoving through the fourth quarter. In the minutes fromthe latest Federal Reserve meeting in September, Fedofficials communicated that they expect to raise rates'09'10'11'12'13'14'15'16'17again “relatively soon”. Ambiguous by normal standards,but for the Federal Reserve, the minutes reflect astronger messaging in favor of a rate increase than wehave heard in recent months. It is unlikely that the Fedwill raise rates on the eve of the presidential election, soDecember becomes the most likely month to get thenext rate increase. Looking to 2017, as themacroeconomy will be strengthens, leaving the Fed withless to justify holding rates at this level next year.Reproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.2

National Commercial Lending RatesRate: 0.75% for 90-Day Commercial PaperPhase: CYear-over-Year: 167.1%Short-Term Interest Rate TrendYear-over-Year Business CycleMonthly Data1/12 Growth -160'07'08US Short-Term Interest Rates ticked up to 0.75% inSeptember, up 47 basis points from the September2015 level (0.28%). Short-Term Rates also rose from0.55% at the end of the second quarter, gainingmomentum despite the Federal Reserve not hikinginterest rates in recent months.The latest messaging from the Federal Reserve’sSeptember meeting signaled that Fed officials expect toraise rates again “relatively soon”. The central bank is'09'10'11'12'13'14'15'16'17unlikely to hike rates just before the election, given thepotential for immediate stock market and currencyfluctuations. This makes December the most likelytiming of the next increase. Looking beyond 2016 andfactoring in ITR’s expectations for an overall acceleratingeconomy in 2017, rates are poised to rise at a quickerpace next year. Evaluate your long-term goals and, if thetime is right for your business, use this opportunity tosecure capital at a favorable rate before capital costsmove higher next year.Reproduction of the material contained in this issue of T.R.E.N.D.S. in whole or part is forbidden without written permission granted by Heating, Air-conditioning & Refrigeration Distributors International.3