Determining the demand for Heating-Ventilation and Air Conditioning Installations can assist you with forecasting sales for your company. Forex Factory states that “Housing Starts” is a leading indicator of economic health as it creates jobs for various construction and manufacturing workers. Furthermore, increasing levels of housing starts show a direct correlation to the future demand driving HVAC businesses.
Since 2009, housing starts show a cyclical trend line, ranging from 168K to 208K. During the summer months, it is evident that the volume of Canadian residential construction gained momentum. This trend could be mainly caused by the ease of construction in comparison to the winter conditions. In November 2011, housing starts experienced its highest indicator reading in the past 3 years meaning that the bottom-end of the cyclical trend line is rising. Consequently, the construction of housing in the past year is increasing, on average, in year-over-year (y/y) comparison. View the table above to see the actual values and the trend line (moving average of 3 periods).
Based on data from CMHC, residents moving in to a newly built home, increased by 3% (y/y) from 2010. This Canada wide average is composed of all provinces and some areas have much higher weightings than others. Ontario and Manitoba had an 11% and 6% increase respectively, meaning that there is a strong, and in most areas, increasing demand for HVAC Installers and Manufacturers. With an increase in the demand of building necessities on the horizon, manufacturing companies should expect growing activity in their factories and shops.
Another excellent way of forecasting the demand for HVAC Installations is by tracking the value of building permits. Building permits are a great measure of future construction, as it is needed to begin construction of a building. When there is a high demand for permits (ie. people are planning their developments), the price goes up as well, so parties can use this value to determine their own future demand as Manufacturers supply necessary HVAC systems to builders. One major downfall to this measure is that the price of building permits is extremely volatile and it is very difficult to detect trends using this measure.