PalletCentral • January-February 2021
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levels in 2021 – which will be a significant drag
on growth.
The Federal Reserve (Fed) has been very
aggressive. Even though the federal deficit is now
approaching $3 trillion, up from $1 trillion last year,
interest rates have remained near zero (Figure 2).
These large deficits and the flood of liquidity to the
financial markets (reason stock market has done well)
will come back to haunt the economy in 2022 and
beyond with rising inflation and higher interest rates.
But given the seriousness of the economic hit from
the pandemic, there was no choice.
Boom in Housing Activity
and Lumber Prices
As noted in May, housing sales and single-family
starts had been doing quite well in the first few
months of 2020 and were expected to rebound quickly
once the restrictions on building were removed. As
it turned out, existing home sales and single-family
housing starts have been much stronger than anyone
expected and caught the lumber industry by surprise.
Existing home sales exploded (Figure 3) after the dip
in the second quarter. Existing home sales approached
nearly seven million units in October, while the
supply of units for sale dropped to three months –
an all-time low. A similar story applies to new home
sales as well. These strong sales have fueled a surge
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RECOVERY
