April outlook for future wood prices
Housing and economy trends create complexity
MADISON, Wis. – Projections for future wood prices in the U.S. were buffeted by strong currents from different directions early in the second quarter of 2022. Thirty-year mortgage rates nearly doubled in 18 months (from 2.67% on Dec. 31, 2021, to 5.27% on May 5, 2022), reflecting Federal Reserve Board efforts to contain strong inflation.
But housing starts and new building permits remained high in March (the latest statistics available from the St. Louis Federal Reserve) despite the rate boost. New permit levels in March inched up at 1%, remaining at the highest level in 15 years. This good news in housing permits despite higher interest rates portends good news for construction wood, if it can continue.
However, consumer sentiment indices are showing rough spots despite full employment throughout most of the country. The University of Michigan consumer sentiment index dipped to 59.4% at the end of the first quarter – its lowest level since 2017. A similar index from the Conference Board (a large business group) was stronger but flattened in April.
Lynn Franco, Senior Director of Economic Indicators at the Conference Board, said, “The Present Situation Index declined, but remains quite high, suggesting the economy continued to expand in early Q2. Expectations, while still weak, did not deteriorate further amid high prices, especially at the gas pump, and the war in Ukraine.
“Still, purchasing intentions are down overall from recent levels as interest rates have begun rising. Meanwhile, concerns about inflation retreated from an all-time high in March but remained elevated. Looking ahead, inflation and the war in Ukraine will continue to pose downside risks to confidence and may further curb consumer spending this year.”