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January-February 2016

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32 PalletCentral • January-February 2016 palletcentral.com North American Lumber Demand The drop in lumber exports offset part of the domestic demand increase. The 46% drop in the value of the Ruble and a 35% drop in the NZ Dollar pushed lumber and log prices down in China. As a result, overall N.A. softwood lumber demand in 2015 grew only 3%. When coupled with the weak Canadian dollar, a drop in log exports that lowered production costs in the U.S. west, plus a boost in southern lumber production, lumber prices fell sharply last year. Lumber Prices The market price of lumber imported from Canada (SPF 2x4) is currently near $250/mbf compared to $350/mbf last year. The market price of lumber produced in the southern states (Southern Yellow Pine-SYP2x4) was down over $100/mbf in the third quarter. The market price of utility grades, especially for Douglas Fir and Hemlock, were in line with these construction grade prices. Hardwood lumber prices were also down sharply for two reasons. Grade exports to China fell significantly. Demand for lower grades to make oil rig mattes fell in line with the decline in oil rigs. Bottom Line The basic outlook for the U.S. economy has not changed that much. Because of the international drag, overall growth remains modest through 2016, near 2.5 to 3%. The bigger change is in the outlook for industrial production, which will also be modest at near 3%. The U.S. net trade deficit will continue to hold back growth over the next year, keeping industrial production growth in line with domestic markets. Inflation will accelerate from the low levels this year as energy prices rebound, but still be near 2%. The Federal Reserve will keep boosting interest rates next year, but at a very modest rate. The consensus view is for short-term interest rates to move up about 1% next year. PC Lynn is president of Strategic Economic Analysis, a compa- ny which assists business managers in thinking about the future. Although the primary focus of his firm is housing and wood products, the company stays current on overall eco- nomic activities in the USA and globally. Lynn may be reached at lmichaelis@getfea.com or phone: 206-434-8102. ECONOMY

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