Without exception, in every conversation I have had regarding the pandemic’s positive impact on the lumber market, not a single person thought this outcome was possible.
On my part, I see that as a failure. My job is to detect the unexpected. When I do not, that creates the 1.4 out of 10 miscues, or missed market forecasts. I consider the FTP call for a reversal high at week 21 a miss.
Looking forward, we must include what we have learned from this experience. Primarily, consumers are going to consume whatever is available. The volume of consumption as a percentage of disposable income increases over time. The national savings rate from 1960 to 2019 declined from 10.6% to 7.6%. By contrast, during the first two months of the pandemic’s stay-at-home quarantine, March and April, personal savings as a percentage of disposable income rose to 13.1% and 33%, respectively. I believe this was due to decreased spending options.
Consider this, reported on May 29, consumer spending declined 13% in April, the most since 1947. That was likely due to the expected earnings decline of 5%. But that didn’t happen. Instead, Uncle Sam padded the US payroll for a 10% increase. Consequently, financially frightened consumers suddenly found themselves flush with cash to burn and few places to spend it. Only businesses which the government deemed “essential” were open. Building suppliers made that cut.
With consumers confined to home, flight to home improvement became the “fad.” The lumber industry, specifically pressure treated lumber, has been the primary beneficiary.
This counter cyclical lumber rally is a circumstantial fad, soon coming to an end, like mullets and bell bottom jeans.
Looking Forward...ML
Are you fed up with being caught on the wrong side of the market...losing orders because your lumber prices make you uncompetitive. I can assure you the orders you lose are not because the other guy is selling at a loss. It’s not you or your buying style. It’s just timing. LLG forecasts when the Lumber Market will rise and fall. Why? Because after 30 years, I know it better than anyone. No one else tells you months in advance when prices will reverse....no one!
A veteran lumberman, Matt Layman publishes Layman’s Lumber Guide, the weekly forecasts and buying advisories that help component manufacturers save money on lumber purchases every day. You can reach Matt at 336-516-6684 or Matt@laymansguide.info.