David Chertudi, DNR Economist
U.S. Economy and Housing Market. While a harsh winter and business inventory adjustments caused the U.S. economy to shrink by 2.1 percent (annualized) in the first quarter of 2014, preliminary estimates of second quarter growth show a strong rebound at an annualized rate of 4.2 percent. Year-over-year GDP growth remains modest at almost 2.5 percent. In October 2009 the unemployment rate peaked at 10.0 percent, but has slowly fallen to 6.2 percent as of July 2014. While these are positive signals, the U.S. economy still faces significant challenges. Although unemployment is falling, it remains historically high and there are significant difficulties for younger graduates and workers, as well as the long-term unemployed. Improvements to the housing market have been disappointingly slow. New housing starts in 2013 averaged 928,000, which is 52 percent over 2011, but have stagnated at near a million so far in 2014. U.S. housing prices have been trending upward since January 2012, but price growth stalled in the second quarter of 2014.
Internationally, the economy of the European Union is shaky, with several countries still in recession and the threat of a deflationary spiral looming. The crises in Crimea and Ukraine have introduced significant political and economic uncertainty and China’s economy continues to show signs of underlying structural and demographic problems. Finally, the U.S. government still has not implemented a coherent, growth-driven economic policy; this seems unlikely to happen in the highly politicized environment of an election year.
Lumber and Log Prices. Lumber and log prices were up in 2013 and continue to improve in 2014. While it varied widely, Random Lengths’ Coast Dry Random and Stud composite lumber price averaged $370/mbf in 2013 – up 20 percent from the 2012 average of $309/mbf – and averaged $379/mbf thus far in 2014. Pacific Northwest log prices have also moved up sharply after being fairly flat for 2011 and most of 2012. The price for a ‘typical’ DNR log delivered to the mill continued to climb from 2013’s $564/mbf average, up 18 percent from 2012, to a nominal high of $624/mbf in January, the highest price since 2000. However, the average price has since pulled back to $558/mbf as of July.