The COVID-19 restrictions across the province are slowly being lifted and businesses are gradually reopening and getting back to a semblance of normal. The economy is doing better than expected, and with new home construction and renovation markets still on a high, it is very favorable news for the Hardwood industry. The Chinese market is still a bit slow, but the domestic market is doing well, as well as other export markets. Industry is trying to respond to the increased demand, however labor shortages are impeding the progress. It is reported that there are some gaps in supplies for some species while others are doing very well.
Ash sales to end users and wholesalers are good, while purchases from China have moderated for this species. Demand from other export markets are balancing this out. Prices were noted as having risen slightly.
Demand for Cherry from China had increased in late spring, but has since seen a slight slowdown. Those who export are adding incentives with modest price concessions to boost sales. Demand on the domestic front is steady due to residential construction.
Flooring manufacturers have reduced their Hickory demand, even though flooring sales remain active. Contacts say they have ample inventories. There is also a decent demand from millwork, moulding and cabinet manufacturers, and the export market is also faring well, noted contacts.
The regionally important Hard Maple species is still in great demand. However, the gap between supply and demand has not decreased, as it has for other species. Sawmills are producing as much Hard Maple as possible and as logs are available, but it is still not enough to supply secondary manufacturers and wholesalers, resulting in climbing prices. Soft Maple sales reports are positive as well, with upper grades going to cabinet, furniture and moulding companies.
Demand from residential wood and truck trailer flooring manufacturers are keeping the Red and White Oak markets high. They are struggling to get additional volumes of lumber to satisfy growing demand. There is also competition from tie and pallet manufacturers for this species, thus prices are inching higher. Red Oak demand from China has slowed, but other markets are taking up the extra production.
Domestic markets for Poplar are good, as are exports to the U.S. There is strong demand from end users as they reported an increase of Poplar finished goods, including mouldings, furniture and millwork. Those who supply Poplar say their inventory is low and are anxious to get more. There is also competition from the wood pallet and container manufacturers as there is a shortage of denser woods, and furniture manufacturers are also seeking products for their frames. It was noted that Poplar exports had been down compared to recent years, although demand has started to climb from Vietnam. Demand for green lumber supplies are priced higher for all grades and thicknesses, while kiln-dried prices are firm.
Demand for Walnut is strong in the U.S., especially from the flooring sector. Production has increased to supply demand of this species. Over the summer, Walnut was being set aside to cut species prone to stain, resulting in a less abundant supply of Walnut.
The Conference Board of Canada recently published a report entitled The Pandemic’s Lingering Effects will Haunt Canada’s Long-Term Prospects – Canada’s Outlook to 2040. Here are some of the outlook’s findings. It forecasts that the Canadian economy will rebound by 5.8 percent this year and 4.0 percent in 2022 due to the ongoing rollout of vaccines and improving labor markets. Over the long term, real GDP is expected to expand by 1.7 percent annually. Their long-term outlook sees modest economic growth, with immigration and better productivity gains helping to counter the impact of the last wave of retiring baby boomers on labor force growth. It notes that inflation will rise over the near term but return to the 2.0 percent range and remain at this level through the long term. This will enable the Bank of Canada to keep interest rates at historically low levels through 2040. Fiscal deficits will persist over long term, as the federal government will find it challenging to contain spending due to rising health care expenditures and demands from provinces and cities for funding. The pandemic has added to the trend toward deglobalization, which emerged during the Trump administration and could persist over the long term to the detriment of Canada’s exporters.
The Conference Board’s long-term forecast remains driven by demographic factors, although some lingering effects from the COVID-19 pandemic could affect economic growth through 2040. The nation’s population will age and also grow more slowly, thus moderating labor force growth. Policy-makers hope higher immigration will solve this demographic problem. Economic challenges include modest productivity growth, various risks facing energy exporters, booming housing markets, and international trade tensions. Several sectors of the economy could be affected by the pandemic over the long term.
The report states the rebound in the global economy will boost Canada’s international trade sector over the near term. It expects the global economy to expand by 5.6 percent this year and 4.2 percent in 2022—slightly higher than their December 2021 projections. The Asia-Pacific region will continue to lead the world economy in growth thanks to the strong rebound in China, which has also boosted economic prospects in the region overall. Once the world economy recovers from the pandemic, economic growth will slow down through the long term, as many of the demographic factors affecting Canada’s economy are present in major trading partners, such as China, the United States, the European Union, the United Kingdom, and Japan. Slower global growth will restrain demand for Canada’s exports through 2040.
Canada’s aging population will have a substantial impact on Canada’s labor markets over the next 20 years. Today, many of the older baby boomers have already left the workforce, and the younger boomers, those aged 55 to 60, are nearing retirement age. Also, the pandemic led some baby boomers to retire sooner than expected, implying that growth in Canada’s labor force will slow sharply over the long term, placing significant downward pressure on Canada’s potential economic growth.
Employment dropped by 975,000 last year because of the pandemic and the ensuing shutdown of numerous businesses and factories. However, the gradual reopening of the economy this year thanks to the rollout of vaccines will lead to a gain of 809,000 jobs.
Beyond 2022, employment growth will slow sharply to annual gains below 1.0 percent per year due to the ongoing retirement of the baby boomers. By 2040, annual job gains will be in the 180,000 range.
Thanks to ongoing government income support programs and the rollout of vaccines, the Conference Board estimates that real household consumption will increase by 3.5 percent this year and 6.3 percent in 2022. Spending will continue to recover over the following few years as labor markets rebound, but increases will subsequently slow down to average annual gains of about 1.7 percent through 2040. Consumer spending growth will be limited over the long term by population aging and by high household debt loads.
The biggest change to household spending resulting from the pandemic—and one that could persist through 2040—is the growing trend to online purchases at the expense of brick-and-mortar outlets. Online sales were increasing rapidly prior to the pandemic but exploded in the second quarter of 2020 due to widespread shutdowns and stay-at-home orders across the country. Shoppers have become more comfortable with technology required to buy goods online, and many will continue to do so even after life returns to normal.
The report notes that some of the recent boost in household income has ended up in the housing sector. Canadian resale markets are red-hot, fuelled by low interest rates and a desire for more living space. Residential demand has also been sustained by relatively pandemic-resistant employment among higher-income households, which tend to be homebuyers, and prospects for an eventually strong economic recovery fostered by federal commitments to supportive fiscal and monetary policy.
Despite the pandemic, housing starts increased by 4.3 percent in 2020 and are expected to post another gain this year. However, starts will then gradually decline over the next two decades, from 220,000 in 2021 to about 160,000 by 2040. As the population ages, more Canadians will move from single-family homes to condominiums and assisted living accommodations. They expect single-detached housing starts to drop at a quicker pace than multiple-unit starts over the long term.
