Most countries in the world are experiencing slower economic growth or economic contraction. Certainly, those with global influence are performing at less-than-optimal rates.<\/p>\n
For instance, the US is contending with a 40-year high rate of inflation and a tightened monetary policy by the federal government. Included are significantly higher interest rates to commercial and consumer borrowers. Also, the US GDP has marked two consecutive quarters of contraction, which is one measure of recession. In contrast, the US manufacturing sector is still expanding, according to its Purchasing Managers\u2019 Index (PMI) readings of over 50, which is another barometer that indicates the US economy is not in recession. But recession or no recession, the US economy is waning.<\/p>\n
Europe\u2019s economy is also suffering from tightened oil and gas supplies extending from Russia\u2019s war on Ukraine. This is affecting both business and consumer activity, and the impacts will become more severe during winter.<\/p>\n
China has earned recognition as the world\u2019s manufacturing hub. But the manufacturing sector of China\u2019s economy has contracted five of the past seven months, based on the government\u2019s manufacturing PMI report. Also, China\u2019s economic growth in 2022 has relied heavily on increased exports of goods and services, which climbed from 21% of the overall economy in 2021 to 36% of China\u2019s economy midway through this year. China\u2019s domestic consumerism created a great deal of economic growth prior to COVID-19, but has slowed substantially.<\/p>\n
COVID-19 and Russia\u2019s war on Ukraine are key contributors to present economic challenges. There also have been policy missteps by world leaders that exacerbated existing problems and risks, however well-intended those policies might have been.<\/p>\n
Putting all the causes aside \u2014 and there are many \u2014 one ramification facing the forest and wood products industries from economic slowdown is reduced consumerism in all major markets around the world. Specifically at risk are housing sales and sales of non-essential, big-ticket items, such as home furnishings.<\/p>\n
An unnecessary reality<\/strong><\/p>\n In particular, the US has a large and growing population of young people that extends in ages from 40 years and younger. Over half of the total US population falls within this age group, which means there can be tremendous consumer buying power for homes and home furnishings for many years to come.<\/p>\n While wood products manufacturing and distribution can support increased product demand at present, companies involved in these businesses cannot stand by idly and indefinitely while waiting for a non-responsive customer base to re-engage.<\/p>\n First, supplies will adjust to present market conditions. That is happening now, even if results from production and inventory cutbacks are not yet evident. In time, and without improvement in economies and consumer activity, manufacturing and distribution capacities will contract. The reality is that businesses have been under financial stress for almost three years. The historic rise in prices that occurred in 2021 did create profits for sellers, but not for long. Rapidly rising costs of replacement goods and materials cut into profit margins and left companies exposed with high-cost inventories when sales prices began to fall.<\/p>\n Time again for transition<\/strong><\/p>\n In the case of US hardwood sawmill production capacity, there has been no measurable change since the early recovery phase from the Great Recession. However, changes caused by COVID-19 and subsequent pressures have affected production capacity utilisation and the product mix of sawn lumber and timbers. That said, continued financial strain could alter the production make-up by acquisitions and attrition of sawmill companies.<\/p>\n This pattern of business is similar to that which began in Q4 2018 and carried over to the start of 2020, as the pandemic emerged. There was evidence of tighter supplies of US grade hardwood in H2 2019, and there was a growing sense of optimism then about improved business heading into 2020. Yes, COVID-19 was unforeseen and changed the marketplace. But before then, US hardwood lumber supplies were corrected.<\/p>","protected":false},"excerpt":{"rendered":" Most countries in the world are experiencing slower economic growth or economic contraction. Certainly, those with global influence are performing at less-than-optimal rates. For instance, the US is contending with a 40-year high rate of inflation and a tightened monetary … Continue reading