Higher inflation has been a cloud over our improving economy. We summarize the improving trends at the beginning of your June HARDInomics report. We have seen confirmation of those improvements while reviewing the developments in each of your states for the July quarterly HARDInomics regional report. The July Rail Time Indicators [RTI] report confirms those observations. Monitoring railroad traffic volume is like taking the pulse of our economy. The growth at the right side of these two bar charts illustrates the faster economic heartbeat. This quote from the report is a concise and encouraging summary:

“Broadly speaking, the second quarter of 2026 saw solid U.S. rail volumes. Weekly average intermodal units in the quarter (282,583) were the second most for any quarter in history, just fractionally behind Q2 2021. Meanwhile, weekly average total carloads in Q2 2026 (230,577) were the most for any quarter since Q4 2019. Importantly, rail traffic growth in the second quarter was broad based, with 16 of the 20 major carload categories showing year-over-year gains. The breadth of these increases suggests that industrial activity has strengthened across a wide range of sectors rather than being driven by gains in just a few. This is a good sign for the overall economy and, obviously, a positive for railroads.”

Port traffic offers another lens for viewing industrial activity, and we started tracking port traffic several years ago after the supply chain broke. Each of these bars is the annual loaded inbound containers to our five largest ports. Tracking port traffic is like measuring the economic pulse with railroad carload activity levels. The bars dip during the thirty-month rate tightening cycle and then recover during 2024 and 2025. The last bar is the twelve months through May of 2026. Within the monthly port traffic trends we see a sturdy and healthy economy. There are other perspectives that confirm a healthy economic pulse.

Bank of America tracks the number of their customer accounts that are receiving a paycheck for insight into employment trends. The orange line in this chart is their payroll estimate change from their June Employment Report, the blue line is the headline grabbing monthly payroll results by the Bureau of Labor Statistics, and the red line is the monthly ADP employment results. We are encouraged to see all three lines turning higher this year. This is how the Bank of America Institute interprets this chart: “The data can be noisy, partly due to seasonal variation and differences in pay-period timing. Nonetheless, in our view, it suggests there is some continued momentum in the labor market.”

Bank of America slices-and-dices debit and credit card spending in their monthly Consumer Checkpoint report. They are able to identify where dollars are spent and the trends per income levels. This is from their July update: “Bank of America aggregated credit and debit card spending per household increased 6.3% year-over-year (YoY) in June, the strongest growth rate since April 2022. With gasoline prices easing in June, total card spending excluding gas surged 5.6% YoY – also the strongest growth since April 2022 and up from 3.9% YoY in May.” Visa’s Spending Momentum Index is another resource analyzing debit and credit card activity that is confirming a healthy economy. The access and analysis by Visa and Bank of America help us see through the volatile energy prices to assemble these indicators for a clearer picture of our economy.

The inflation clouds should subside during the year ahead, and that will allow market interest rates to decline and demand for HARDI members to improve. The residential market is ready to wake up. We see that with the encouraging existing home sale activity in the Southern region that is home to 45% of market activity. We see that while preparing your quarterly HARDInomics regional report with the employment in cyclical industries improving in many states. We see that with the stabilizing growth of employment in non-cyclical categories in many states. The consistent traffic at our ports represents a healthy economy. That is confirmed by the pulse of traffic through our railroad system. Our economy is chugging along. That will include demand for HARDI members, but probably not until next year when the inflation clouds will be less threatening.

The charts below feature data from the HARDI Unitary Market Program, a SKU-level benchmarking service where participants can gain free access to dynamic dashboards once participating. From these dashboards we can unlock a view into the sell-through market and be able to see which products lines are growing or lagging, and where at geographically.  

 The orange line in the chart above shows the rolling 12-month growth rate for the combined total for air conditioners, heat pumps, and furnaces. The HVAC industry saw a period of strong growth in 2024, driven largely by pre-buy activity ahead of the A2L refrigerant transition. Now the industry is on the other side of that surge, the pendulum has swung in the opposite direction as distributors try to work through their elevated inventories in an uncertain economic environment. The inventory build-up, shown by the dark line, is the consequence of both slower demand and difficult year-over-year comparisons to the first half of 2025. Encouragingly, the pace of decline in the 12-month average growth line has flattened in recent months, as the rolling 3-month growth rate, not picture here, has moved from negative growth to 0% through May 2026.

The charts above visualize distributor sales performance by AC and ASHP product efficiency range on a rolling 12-month basis. As we’ve shared in the past, the efficiency mix of AC sales has shifted lower since 2024, likely reflecting the increasingly price sensitive consumer in a higher uncertainty market. Models with a SEER2 rating of 15 or higher have had a major decline in growth over the past year, while the base efficiency ACs have held steady. ACs with a SEER2 rating of 14 or lower made up 57% of the volume sold in May 2026, compared to 52% in May 2025.

Encouragingly, we see an opposite trend on the heat pump side for both ducted and ductless units. In terms of overall mix sold by participating distributors, the average SEER2 ratings for both ducted and ductless units have held relatively steady over the last year at approximately 15 and 20.5, respectively. The rolling 12-month unit sales patterns for both ducted and ductless heat pumps nationally have followed a relatively similar trajectory in recent months. Heat pumps show a trend that is generally inverse of ACs, where the lower efficiency models are facing declines, while the higher efficiency models have continued growth. The gradual shift toward higher efficiency models appears to be continuing for heat pumps, or at the very least not reversing amid current economic conditions.

Looking ahead we are cautiously optimistic. As the temperatures climb during the summer months, unit volumes should get a boost. The year-over-year weather comparisons for July have tougher comps in some regions, as the U.S. saw heatwaves across the Northeast, Mid-Atlantic, and Great Lakes regions in 2025. However, in August, 6 of the 7 HARDI regions will have much easier temperature comparisons to last year (with the West being the only region facing unfavorable comps).

Housing also offers some encouragement with the June Existing-Home Sales report from the National Association of Realtors. Despite mortgage rates being above 6.5%, the South, Midwest, and Western regions all posted continued growth with healthy underlying trends. Although economic uncertainty continues to weigh on consumer confidence, we expect year-over-year declines in unit sales to continue moderating over the next few months and to trend closer to flat growth. However, a meaningful return to growth will likely depend on a stronger housing market and lower interest rates.

_{Additional insights are available to participants of the Unitary Market Program via the dashboards on the CoMetrics website. Participating in the program and unlocking the dashboards helps companies answer a simple question: is it me, or is it the market? Distributors interested in seeing how the market unfolds in real time are encouraged to contact Grace Helser for more information or fill out this onboarding form to get started today.}