Last month, HARDI (Heating, Air-conditioning & Refrigeration Distributors International) announced the hiring of economist Paul Hallmann to its Benchmarking department to help provide macro-level economic insights into the HVACR distribution industry.
“Having our own economist that will be directly integrated into our data analysis offerings is an exciting prospect for us and our members who take advantage of them," said CEO Talbot Gee in a press release about Hallmann’s hiring. "With Paul on board, we’re eyeing some pretty lofty goals for expanding the benefits of HARDI Benchmarking and HARDInomics services, and we look forward to presenting them to members here in the near future.”
Hallmann, who previously served as a corporate strategist for Scotts Miracle-Grow Company, said one of his first priorities in his new role is to immerse himself in the HVACR distribution industry. “So I can start bringing actionable economic insights to the table,” he said. Ahead of HARDI’s annual conference in December, we asked Hallman to give us a few rules of thumb when it comes to reading the economy like an economist.
First off, are there any changes in the way you would analyze the economy coming from being a corporate strategist for Scotts Miracle-Gro to working for HARDI?
Serving as in-house economist was a responsibility that remained with me across multiple internal roles at Scotts Miracle-Gro, so there are actually a lot of similarities. I was responsible identifying, monitoring and forecasting the key economic variables that impacted the business. The biggest difference is that I will be able to focus even more on economic analysis which will result in more robust output. I’m really excited about local level economic projections and the integration of non-economic variables, like weather, into our future products.
As a new economist in the HVACR industry, I’m sure one of the first things you’ve heard that is affecting our industry is President Trump enacting steel tariffs. When it comes to the economy, do tariffs translate to good economic policy?
I don’t think you will find an economist who would say that tariffs are good economic policy. Both economic theory and history have proven that the imposition of tariffs results in a decline in economic welfare. While the net impact is certainly negative, a tariff does create some winners and losers. Those who produce goods that compete with imported goods stand to benefit while those who produce goods that compete with exported goods do not fare as well. This is playing out now in the steel and soybean industries, respectively.
The biggest question that no one is able to answer right now is: How long will the tariffs last? If we view them as a part of an aggressive renegotiation of trade policy then they are likely transitory and we should expect a near-term return to historic norms. Alternatively, a failure to progress in trade negotiations could mean that the current state remains in place or becomes even more extreme for the foreseeable future. Given the current rhetoric and posturing, it’s hard to say which of these outcomes is more likely.
Could you give a general forecast on the state of the economy now?
Right now the economy is as healthy as it has been since the Great Recession. However, GDP growth is likely at or near its peak and will start to decline in 2019 with a risk of more significant decline as we enter into 2020. The ongoing impact of tariffs and the potential withdrawal of fiscal stimulus are the two key drivers of a possible “soft” recession in late 2019 or 2020.
Right now, what are the economic indicators HVACR distributors and contractors should be watching that give insight into the health of the economy?
I’ve been very impressed with the economic analysis that HARDI produces. The industry is driven primarily by residential and commercial construction, consumer sentiment and the weather. There’s no silver bullet to understanding the health of the economy or the HVACR industry. We aim to add value by analyzing all of the important factors and providing a fully informed assessment.