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The source for Canadian and U.S. lumber and panel prices
New figures released this week from several US government departments show the balance of imports and exports in the US is shifting. Canadian imports of wood, pulp and paper products into the US have been falling steadily since 2005. Meanwhile recent Canadian trade figures show that Canadian exports of wood products to emerging markets have been steadily rising.
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US Trade Balance
Since 3Q 2008, the world has been waiting anxiously for signs of good news out of the US economy. Toward the end of 1Q 2009 there was a perception by analysts that, while improvement was still a way off, at least the rate of economic decline in America was slowing. The latest US government reports, released this week, indicate cautious optimism is justified, but how long it will take for the US economy to recover completely is still not known.
The US economy shrank at a 5.5 per cent pace in 1Q 2009, the US Bureau of Economic Analysis said Thursday in a report offering a glimmer of hope for recovery from prolonged recession. It still showed a dramatic decline on the heels of a 6.3 per cent slide in 4Q 2008 -- the worst slump in decades -- and 0.5 percent in 3Q 2008.
Both exports and imports fell, but the decrease in imports provided a boost to GDP of 2.39 percentage points. Real exports decreased 30.6 per cent in 1Q 2009, the steepest drop in foreign sales in 40 years, compared with a decrease of 23.6 per cent in 4Q 2008. Real imports decreased 36.4 per cent, the steepest since the summer of 1947, compared with a decrease of 17.5 per cent in 4Q 2008.
Real US federal government consumption expenditures and gross investment decreased 4.5 per cent in 1Q 2009, in contrast to an increase of 7.0 per cent in the 4Q 2008.
Separately, the Labor Department said the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 -- a measure of the strain still faced by hard-pressed consumers. Consumer spending, which fuels two-thirds of US economic activity, decreased by 1.4 per cent. Weak job markets and falling home prices are expected to dampen spending for some time.
"The economy will contract less in 2Q 2009 -- somewhere between 2.0 and 3.0 per cent annualized -- be flat in the third quarter, and then start to expand at the end of the year," said Paul Ferley at RBC Capital Markets adding that the revisions "do not alter the near-term expectations for improving growth going forward."
Overall business investment plunged at a record 37.3 per cent rate during the 1Q 2009, while spending on homebuilding in the US fell 38.8 per cent for its biggest quarterly tumble since early 1980. Nonetheless, corporate profits grew at a 1.4 per cent rate during 1Q 2009, after falling 10.7 percent in the final three months of 2008.
“The recession is losing steam,” Ken Goldstein, an economist at the Conference Board, said in a statement. “If these trends continue, expect a slow recovery beginning before the end of the year. However, employment will take longer to turn around.”
US existing home sales rose 2.4 percent in May, to a seasonally adjusted annual pace of 4.77 million homes and apartments, marking the first back-to-back monthly increase since 2005, the National Association of Realtors said Tuesday in a sign the troubled sector was steadying. Foreclosure-driven declines in property values are helping to reduce the glut of unsold houses.
"Sales are stable but exceedingly low," said Celia Chen at Moody's Economy.com. "The NAR's inventory numbers likely understate the magnitude of the inventory overhang since many foreclosed units are not listed."
Sales of distressed properties declined to 33 per cent of all sales in May from 45 per cent in April. NAR officials said this distorts the median price. The national median existing home price for all housing types was US$173,000 in May, down 16.8 percent from a year earlier, but up from US$166,600 a month earlier. Meanwhile, the seasonally adjusted annual rate of new-home sales was down 0.6 per cent from April and fell 32.8 per cent from May 2008, amid a glutted housing inventory. From April to May, new-home sales actually increased in all regions of the US except the South, where they fell by 8.5 per cent, the Census Bureau reported. But because the volume of new-home sales in May was much greater than in other parts of the country, that region's sales decline dragged the national total into negative territory. Compared with a year ago, May new-home sales were down by double-digit percentages in every region of the US. The median sale price for a new home in May was $221,600, down 3.4 per cent from a year ago.
"Housing is really what led the US into this downturn, and I think, at the very least, we have to see a stabilization in the housing sector before we can count on a recovery for the broader economy," said Douglas Porter, deputy chief economist of BMO Capital Markets.
"'The crisis cannot end fully until home prices in the US are at least stabilizing,' says Alan Greenspan, who continues to dissect housing data with as much interest as he did when he was Federal Reserve Chair. "The lower house prices go, the less those loans and investments are worth and the weaker the foundations of the financial system are." Greenspan went on to point out that although the number of home sales are up, the prices of those sales are not.
Commodity prices have seen significant rallies of late, with oil prices rebounding to double their historic lows of 2008 and copper also rising almost double. While housing starts appear to be coming back, a full strengthening of the US economy may take some time yet.
In terms of the lumber industry, there was limited logging in BC through the past winter as companies tried to reduce working capital requirements. As a result lumber companies did not build a log inventory. Currently, with logging restrictions in place due to forest fire hazards through many areas of the province, and the threat of a potential labour dispute brewing, there will likely be little opportunity to resume logging on a large scale until September. Given an average of two months from bush to finished lumber, most BC companies likely won't be able to start building lumber supply until November. In the ideal scenario timing would coincide with the projected resurgence in US home building.
