Lumber’s Losses Could Be a Sign of an Improving Economy

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Lumber companies probably don’t want to hear it, but the recent decline in lumber prices might actually be a sign that the U.S. economy is moving in the right direction. That’s the take from various financial, government and economic experts amid a continuing drop in the price of lumber and lumber futures.

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As of the close of business Monday, lumber prices were down 0.6% for the year as supply catches up with demand, Bloomberg reported. Lumber prices for September delivery dipped 5.6% on Monday to $712.90 per thousand board feet on the Chicago Mercantile Exchange. That’s down from more than $1,730 per thousand board feet at its peak.

As previously reported on GOBankingRates, lumber futures in June sank more than 40% — the largest drop on record since the 1970s. Overall, the number is down more than 18% in 2021 and headed for the first negative first half since 2015.

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The decline in lumber prices is yet another example of an overall easing in commodity prices following a steep rise earlier in the year. The earlier spike in prices raised fears that rising inflation would stall the economic recovery.

But as Bloomberg noted, U.S. Federal Reserve Chair Jerome Powell said last month that lumber’s recent decline is a sign that price pressures and supply bottlenecks are easing as the U.S. economy reopens and the impact of stimulus checks fades.

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That should be good news for the overall economy because it calms worries about unchecked inflation. As The New York Times reported last month, decisions by both consumers and companies to put the brakes on spending have convinced some analysts that the recent rise in inflation is more a matter of temporary mismatches in supply and demand than an omen of runaway prices.

Kristina Hooper, chief global market strategist at the investment management firm Invesco, told The New York Times that the lumber market’s recent behavior is a sign of consumer sanity.

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“We don’t have that kind of buying frenzy that creates sustained inflation,” she said.

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Last updated: July 13, 2021

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