With summer and vacation break behind us, it is time to plan for the fall and winter seasons which will quickly be upon us. According to conversations heard in most areas of the Hardwood industry, the housing market showed signs of reduced use of Hardwoods in housing construction than in the past.
According to reports, Ash lumber supplies increased in Eastern U.S. border states in the past couple of months, despite the Emerald Ash Borer ravaging these tree stands. Developing production is readily being absorbed, with prices reported as pressured. Kiln-dried business is steady, and its availability has resulted in adequate volumes going to market.
To avoid stain, sawmills were processing Whitewood logs quickly, and so Aspen production had edged up in some areas. It was noted, however, that demand for this species was flat, with excess stocks available. Kiln-dried Aspen is also exceeding buyers’ needs, and competition for orders was reported as pushing prices lower.
A slight improvement was noted in sales of Hard and Soft Maple since earlier this year. Cabinet manufacturers, as it was reported in the past had reduced their purchasing of these species due to reduced home construction numbers, and competition from MDF and plywood to make the cabinets, which was having an impact on Maple cabinet sales. Kiln-dried inventories of Hard Maple are high relative to buyers’ needs, with prices being mixed. Some contacts stated that sawmill production was outpacing green lumber demand for several grades and thicknesses. Supplies of Soft Maple are exceeding demand, even though sawmills reduced their quantities produced for this species.
Contacts said Birch demand is off, and since Birch is used as an alternative to the pricier Hard and Soft Maple, demand has lessened for this species as well. Sawmills and wholesalers are shipping developing production of green Birch, and prices are stable. Kiln-dried inventories have increased due to lower demand on domestic and international markets, which is causing stiff competition for orders.
Basswood production is being avoided by certain sawmills due to salability issues in some areas. Wholesalers have reduced their purchases of kiln-dried volumes as well. It was commented that pallet manufacturers had not been buying large quantities of Basswood for pallet lumber or cants, thus prices were weak. Many sales contacts commented kiln-dried Basswood markets are very challenging, with orders very hard to come by.
Red Oak green lumber production had improved recently. Supplies were surpassing the demand of No. 1 Common and Better grades. Reports are mixed for kiln-dried Red Oak, with some saying sales are good, while others say it is not good, with prices varying accordingly.
White Oak is seen as the top seller by many in the Hardwood industry at this time. Demand for White Oak is good, and with limited supplies, it is driving strong business, and so prices are up. Kiln-dried White Oak inventories are low, with end-users having to work a bit harder to stock their on hand supplies. Prices have risen due to sales volumes.
Toward the end of July, Prime Minister Trudeau announced changes to his Cabinet, and according to the announcement, this new team will continue building on work done since 2015, to invest in Canadians, strengthen the middle class, and move forward on housing and putting more money back in families’ pockets. The team will also continue to fight climate change and walk the shared path of reconciliation.
According to published reports, in June (the most current data available), the Consumer Price Index (CPI) rose by 2.8 percent (y/y). This was lower than May’s 3.4 percent (y/y) increase. Gasoline prices rose by 1.9 percent (m/m) but were 21.6 percent lower than a year ago. Year-over-year, food prices increased in stores (+9.1 percent) and restaurants (+6.6 percent). The Core CPI (excluding food and energy) grew by 3.5 percent in June (y/y), lower than the 4.0 percent increase (y/y) in May. Higher prices in several shelter and food subcategories were key to overall CPI growth. On a seasonally adjusted monthly basis, the CPI grew by 0.1 percent in June (compared to a 0.0 percent increase in May).
The average of the Bank of Canada’s three core inflation measures fell to 4.2 percent in June from 4.3 percent in May. CPI-common fell to 5.1 percent, CPI-median dropped to 3.9 percent, and CPI-trim slid to 3.7 percent.
Lower gasoline prices compared to the same month last year contributed to dragging headline inflation down, though price growth deceleration was comparatively broad-based. Mortgage interest costs continued to accelerate in June and will add inflationary pressures over the coming months. Excluding mortgage interest costs, the consumer price index grew by 2.0 percent (y/y).
But inflation remains elevated. Falling energy prices, base effects, and higher interest rates brought consumer price growth within the Bank’s target range, but not to its 2 percent target. Consumers’ near-term inflation expectations continued to fall in the second quarter of 2023, but remain far above pre-pandemic norms and the Bank’s target. The cost of food in stores rose again in June, year-over-year. Russia refused to renew a deal that has guaranteed the safety of grain, Ukraine grain exports, which could trigger an increase in global food prices.
Wage growth has moderated, which will ease some inflationary pressure if the labor market maintains its slowdown. But some firms report that they aren’t finished raising prices in the wake of cost increases over the past three years. This will likely keep the scale and frequency of price changes elevated as the year unfolds.
The Bank of Canada raised its interest rate in July, due to concerns about the current state of inflation. The persistence of core inflation was a key justification for this hike, the second since the Bank cancelled the pause to its rate hiking cycle in June. In June, the Bank’s two primary measures of core inflation (CPI-trim and CPI-median) averaged 3.8 percent. These measures averaged 4.5 percent between January and May 2023. While core measures are falling, they are decelerating more gradually than headline inflation. The direction of core inflation over the coming months will be a key factor for determining the direction of monetary policy—and the financial fate of Canadians—from here. In this brave new world of stickier inflation, expectations that rates will begin to fall in early 2024 may be premature.
