The Global HVAC Inflation Impact

The HVAC inflation and its impact on the global air conditioning, heating, and ventilation industry.

 

Every time the news is on, it seems that rapid inflation and the effects it has on consumers are highlighted at least once, making it difficult to avoid hearing about the rising costs of basic commodities on a daily basis. These fears have already made their way to the HVAC industry, making distributors fear that inflation would decrease demand, especially in the residential sector.

 

This is on top of the undeniable truth that the cost of HVAC systems has increased over the previous few years. This is a pattern that can be seen throughout North America, not just in Canada. Beyond alterations in behavior, there are other more concrete and resource-related causes for the price increase.

In reality, according to certain figures, the price of HVAC commodities has occasionally increased by more than 20% when comparing one year to the next in the recent past. That rise is significant enough to have an impact on the price hikes for HVAC systems that we have all witnessed.

Two distinct reports from the Bank of America and J.P. Morgan revealed that inventory levels are too high, expressing concern about the amount of merchandise in the channel. However, statistics demonstrate that the long-term fundamentals of home demand remain strong.

By the end of March 2022, HARDI distributors were selling 17% of HVAC equipment on average. This was essentially similar to the inventory growth rate adjusted for inflation (19 percent). The fact that equipment sales growth has historically kept up with inventory expansion and that sales of HVAC equipment currently represent over 50% of average HARDI distributor sales refutes the surplus inventory argument in numerous ways.

In light of these factors and others, it appears that industry demand patterns haven’t changed much since the Covid era. Over time, demand is bound to slow down from its current frantic pace, but when that happens, it seems more likely that there will be a gentle landing than a violent plunge.

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window type air conditioning units outside the building in the Philippines

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