It would take a lot of retrofit and remodeling work to make up for that, and that level of economic activity is unlikely.

A year ago at this time, ARI was predicting that the industry could see another record year for unitary equipment shipments. Shipments for 1999 totaled 6.65 million units, up 6% over what had been the previous record year in 1998.

If the economy continued to be strong and the weather hot, 2000 shipments could hit 6.7 million units, Dooley had said.

The Cassandra was Honeywell Home & Building Control in its semi-annual economic forecast. Honeywell (which no longer produces the forecast) predicted that unitary shipments would drop 8% in 2000, mostly because of softness in the housing market.

Honeywell was only partially correct. NAHB estimated that 2000 housing starts will finish at 1.6 million units, down 3.8% from 1999. And Dooley was right. In mid-December, he predicted that 2000 would be another record year for shipments.

But all is not rosy. Unitary shipments took off like gangbusters in 2000 for the first six months. Starting in July, however, shipments dropped every month. Shipments were doing slightly better on the heat pump side, up 5% over 1999 for the first 10 months.

Publicly traded companies such as Lennox and York issued weaker results, citing cooler than normal summer weather in the Midwest and Northeast.

Even the normally upbeat Dooley expects 2001 to be down, especially at the beginning of the year. "Given the slowdown in the economy and the six interest rate hikes, it's obvious that the first quarter of 2001 will see some slowing of the economy," he said.

The only factors that could save unitary shipments for 2001 would be an economy that is far better than anyone expects and a hot summer.

"Given the fact that the Federal Reserve Board is expected to ease up on interest rates and that we have a full-employment economy, the prognosis for next year could be that we will have our second best year in history, if we don't achieve another record," Dooley said. "If you want to peg a number next year on units, you can guess that shipments might reach the 6.5 or 6.6 million unit range."

York International is similarly cautious. The company told stock market analysts that it expects revenues to grow 3% in 2001, with the underlying markets served to be flat or grow at the Gross Domestic Product growth rate.

Lennox International is also cautious, especially regarding the first half of the year.

"With the growth in distributor inventories that has resulted from the unfavorable weather, we believe we will feel the effects of the weather-related industry slowdown into the early part of 2001," said newly named Chief Executive Officer Bob Schjerven.

The unitary equipment market can sometimes hope to be saved by the replacement market. Replacements now account for nearly 60% of sales. That may not happen this year. David F. Seiders, chief economist for NAHB, is predicting that the prime rate will go up to 9.5% this year, which will have a negative influence on consumer credit purchases. Seiders is also forecasting that existing home sales will drop 4.4%. Fewer existing home sales mean less remodeling.

The industry may receive a boost from the heating equipment side. Weather throughout much of the central United States was bitterly cold, snowy or icy through the first two weeks of December. Unfortunately, the Gas Appliance Manufacturers Association was not as optimistic in its forecast.

GAMA forecast the average shipment for gas warm-air furnaces as 3.08 million units for 2001, down from 3.11 million in 2000.

Oil warm-air furnace shipments are predicted to drop to an average of 118,353 this year. Gas cast-iron boilers are expected to be flat at 202,000 units shipped. Oil cast-iron boilers will also be flat at around 127,000 units shipped.

On the hydronics front, "It's anybody's guess," said Larry Drake, executive director of the Radiant Panel Association. "Business is booming and has been for a long time. There's no sign of slowing down as long as the economy stays strong."

Hydronic radiant heat is steadily gaining popularity, especially in higher-end homes and commercial applications. Owners of such upscale residences are more likely to come up with the funds to add radiant heat, he said, even during a downturn in the economy.

The Midwest has seen a growth spurt in radiant systems, Drake noted, while radiant is still strong in the Northeast, the Pacific Northwest, California and the Colorado Rockies.

Wholesalers "cautiously optimistic"

The Northamerican Heating, Refrigeration and Airconditioning Wholesalers Association released its forecast for the first three quarters of 2001, which is based on the UCLA Anderson Forecast. The forecast suggests that the economy is still "looking bright" and the Federal Reserve was to remain on "watch and hold."

The National Federation of Independent Businesses reported that small business owners remain optimistic about future business activity. It noted that small business tends to react more quickly than big business to changes in the economy.

NHRAW predicts a decrease in median sales growth for the first half of 2001. The first quarter could see a 2% reduction in total dollar sales, compared to a 9% increase in 2000. The second quarter is expected to decrease 6%, compared to a 10% rise in sales the previous year.

However, the association's forecast predicts a 15% increase in total dollar sales for the third quarter.

Wholesalers generally agree with NHRAW's predictions.

"We expect a slowdown in the general market, but we remain cautiously optimistic that 2001 will be a good year," said Andrew Larson, president of Gustave A. Larson Co., Pewaukee, Wis.

For a large part of the nation, last year's cool summer also cooled business, but Larson is anticipating that the bitterly cold winter will result in a warmer-than-usual summer this year.

Continued growth is the message from Johnstone Supply's (Tigard, Ore.) President Gary Daniels.

"There is no doubt that seasonality still plays a part in this business, but I don't see any slowdown for the coming year," he said.