The Air Conditioning and Refrigeration Institute is out with its May shipments report, which showed a 7% dropoff in U.S. factory shipments of central air conditioners and air-source heat pumps.
The group said shipments of unitary air conditioners and heat pumps came in at 682,000 in May, with year-to-date shipments at 3.2 million, up just 4% from a year ago. Heat pump shipments alone were 208,600, up 23% from a year ago. The total shipped so far this year, 949,000, is about 22% above year-ago levels.
Prudential Securities analyst Nicholas Heymann says the softness in overall May shipments is likely the result of the market still digesting surging 10 SEER production from earlier in the year.
"Manufacturing inventories rose by about 33,000, while distributors inventories fell 26,000 from April levels but are still 133,000 above year-earlier levels, despite year-to-date degree days being 12 percent higher this year than last," Heymann said
Contractors and wholesalers bulked up their inventory for 10 SEER outdoor units dramatically earlier this year in anticipation of the transition to 13 SEER. SEER stands for Seasonal Energy Efficiency Ratio and is a rating of how much energy or electricity is used during a specific time period of operation. Used by the government to establish the efficiency level of cooling equipment, as of January 1 the minimum rating had to be 13, up from 10, which had been the minimum since 1992.
Heymann noted that May marked the first decline in distributor inventories since December 2005, and distributor shipments rose by just 1.1% from May 2005 while they're up 11.2% year to date.
"Softness in the residential HVAC market, despite higher degree days year-to-date, could reflect slowing consumer spending due to higher interest rates, rising gas prices, and a weakening housing market," Heymann said.
The analyst expects further inventory reductions by distributors to temper manufacturing production upside potential in the third quarter, especially measured against the hot summer of 2005.