Stocks moved higher ahead of this weekend’s G 7 economic summit in Canada. At the close the Dow gained 75 points to 25,316 on lighter volume. For the week the Dow was up about 2.6% thanks to strength in manufacturing, retail and banking. The service sector in the US had its best start since 2004 and both BTS and IBD indicators are positive.
Lumber prices continue to creep higher into record territory. The Random Lengths Framing lumber price index hit a new high of $582 up from $578 a couple of weeks ago. While buyers are resistant to record prices and fearful of credit limits and downside risks, the price of lumber continues to drive higher. One client mentioned to me that the rebuild effort in Santa Rosa, CA after last year’s fire have been hampered by lack of labor, high lumber prices and the local building codes being upgraded to require every home to have an installed water sprinkler fire system which is not covered by insurance. Ouch! These are not cheap.
Lumber production in western US is up 9.1% from a year ago according to the Western Wood Products Association. Within that figure, coastal production is up 10.8% while inland empire production is up 7.7%. Canadian lumber production however is off 2.4% yoy. Meanwhile, multimillion dollar mill upgrades and new mill construction projects are happening in Mississippi, Texas, Maine, South Carolina, Idaho and Washington to name a few states. These projects should eventually bring supply to the markets and hopefully stem the price increases. After years of struggling, US mills are making money and are investing that money into new equipment to meet demand.