US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Wood You Believe It? Lumber Prices on the Rise Yet Again

The cost of lumber in the US reached its peak in mid-2021, as a misreading by lumberyards and homebuilders of the impact of COVID-19 on consumer behavior led to a shortage of lumber and prices triple those seen in early 2020. The situation was exacerbated by COVID-related supply chain issues and tariffs on softwood lumber imports from Canada. This greatly increased the cost of new home construction (around $36,000 per home, according to the National Association of Home Builders) and home renovation projects, which became especially popular among the vast amount of households stuck at home during the pandemic.

Lumber costs finally fell in the summer of 2021, as DIY-inclined homeowners grew fed up with sky-high lumber costs and postponed their renovation projects. While lumber costs remained well above pre-pandemic levels, there was some sentiment that the market had stabilized enough to avoid further short-term price spikes.

Well, that lasted a few months. In 2022, lumber prices are again shooting up, and as of February 17, are nearly three times the levels seen as recently as August 2021. This latest jump on the trampoline is caused by a variety of factors, such as:

  • the November decision by the US Commerce Department to double its tariffs on Canadian softwood lumber imports to nearly 18%, despite the inability of domestic sawmills to meet US demand
  • damage caused to Canadian forests by a plague of mountain pine beetles and a strong wildfire season
  • labor shortages for sawmills that contribute to output lagging new home demand
  • broader inflationary pressures impacting operating costs

Are there reasons to believe that lumber prices will regress in the near-term? A receding of the Omicron wave could help ease labor and supply chain issues. Additionally, the Commerce Department could ease its tariffs on Canadian softwood lumber imports (as it did in 2020), which run contrary to both President Biden’s trade policy criticisms while running for president and his administration’s affordable housing goals. Lumber demand, in the meantime, will remain high.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


What Freedonia Analysts Are Chatting About…

Freedonia analysts participate in a group chat where they share news, notes, and commentary of general interest... or things that entertain us. Sometimes, we are just sharing links. Other times, the links spark conversation. Below are excerpts from a few of those recent conversations:

“This has been a store-within-a-store extension recently... they are going more the way of Tractor Supply with this (pet & home supplies in one place) concentrating more on the home/decor/consumer angle and leaving more of the contractor/professional side to Home Depot. You can see that in the look/style of the stores too.”

“Tractor Supply is big in our area and we get a ton of ads for their pet products.

“Another recent store-within-a-store example is Sephora in Kohl’s.”

“Interesting! But stores have to be careful not to get too cluttered.”

“What happens when there is a store-within-a-store-within-a-store?... META

“Who will pay for it?”

“I think the technology started in the electric/hybrid bus industry. There was a lot of innovative charging technologies being developed for transit buses over the last 5 years or so. A few years ago, scientists in the Netherlands also had an idea of incorporating light and screens into the road to broadcast warnings to motorists that are driving. Interesting that people are rethinking something as simple as the road.”

“They have those electric roadways that charge EVs in Sweden. It seems much more feasible in a country that small.”

“Does it matter that Sweden’s roads are colder? Would a desert area be able to use them?”

“Trivia: roads in Las Vegas can reach 160 degrees”

“Hahaha ‘energy crisis’… wait, my cup is empty now too – more coffee!”

“Might hurry along the BYOC trend again... sell the beverage, not the cup!”

“I think some people are still squeamish about handling others' stuff (maybe especially something like a cup)”

They had a process for it pre-pandemic... I'm sure they can do it again.”

Starbucks has had its reusable cup discount back in place since June. ‘Starbucks held extensive trials and has adopted this new process, using a ceramic mug to transport the reusable cup through the bar, in EMEA and Asia Pacific to reintroduce reusable cups with confidence. Only clean cups will be accepted.’”

“Is the trucker protest in Canada going to cause a lot of trouble as the shipping containers parked out at sea?  I know that it's not nearly as expansive an event as the ships, but…”

“The bridge carries 30% of all truck trade between the US and Canada, so I think there will be pushes from both sides to cut this as short as possible.”

“See this? ‘New Zealand police arrest Covid protesters as 'freedom convoys' spread’ Some countries are already cracking down.”

“It may, if it persists or spreads. They are rerouting trucks north to a different bridge, but there is a 17 mile backup at this point.”

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Russian Aggression Toward Ukraine Threatens Metal Supply Chain Issues

As Russia continues to amass troops near its border with Ukraine, the rest of the world waits to see if there will be aggression or a step back. NATO powers have been united in their condemnation of the aggression (though not in the level of material support) and vow to implement crushing sanctions if Russia does follow through with the invasion. 

The economic impact of a renewed war between Russia and Ukraine would be profound, impacting everything from commodity prices and a global supply chain already fraught with issues. The manufacturing sector, for instance, could face serious repercussions from the conflict and “mother of all sanctions” that the US has promised would follow given Russia’s position as a prominent exporter of metals

As Russia is the leading global exporter of nickel and palladium (and is also a major supplier of aluminum, platinum, steel, and copper), these sanctions would have broad effects on a number of industries:

  • automobile production, as palladium is a key component of catalytic converters, copper is used in radiators and electric vehicle production, and aluminum is used in engines
  • electronics, as nickel, aluminum, and copper are used in medical equipment, power generation, mobile phones, kitchenware, and other consumer electronics, which have been in especially high demand following the pandemic
  • industrial equipment manufacturing, which uses platinum
  • others that are extensive users of aluminum, such as can and airplane manufacturers

This is not to mention the supply chain issues that would arise from price spikes related to energy and food, which would also follow an invasion of Ukraine. While NATO has refused Russia’s demand to stop expansion into Eastern countries, it is important to remember that it is not yet a certainty that there will be conflict. 

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Industrial Components, Machinery & Equipment, Automotive & Transport, and Construction & Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


US Housing Market Predicted to Remain Strong in 2022

The US housing market has seen impressive levels of growth over the past two years. Even as the COVID-19 pandemic affected the US economy, Americans remained highly interested in buying homes – as indicated by the high levels of home sales and the record-low levels of available homes for sale. After a year and a half of above average activity, many in the industry wonder if this pace is sustainable. A series of recent articles indicates it can.

According to one report, single-family housing starts will remain over one million units in 2022 and 2023. While growth in this key segment will be modest over the next two years, this level of new home building is still more than 25% over that of 2019. Multifamily housing starts are forecast to advance more rapidly – over 6% in 2022. In both the single- and multifamily housing segments, builders will continue to capitalize on strong demand for new housing and years of underbuilding, which has thousands of potential homeowners looking for residences in vain.

Housing prices will also remain high over the next year or so, due to:

  • the shortage of available units
  • rising costs for key raw materials, particularly lumber and plastic products, such as siding and windows and doors
  • a shortage of labor across construction and the skilled trades

Home builders remain optimistic about the market amid these conditions. Nearly all builders report that they will build more homes in 2022, even in the face of rising prices and shortages of key materials. To offset this, home builders are increasingly using software to better manage projects and minimize downtimes, as well as specifying prefabricated components to reduce delays at the construction site.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Strong Growth in Kitchen Cabinets Demand in 2021: Will It Continue?

A recent press release from the Kitchen Cabinets Manufacturers Association (KCMA) reported strong gains in cabinet sales in 2021, with a gain of 14.6% from 2020. This is not surprising, given:

  • high levels of housing starts, particularly of single-family units with the largest kitchens (and thus have more cabinets)
  • strong homeowner interest in home improvement projects, such as kitchen remodeling – when homeowners often replace older cabinets with newer ones

These bursts of activity are demonstrated by the growth seen in the various kitchen cabinet types. Stock kitchen cabinets sales rose over 16% in 2021, bolstered by the increase in housing starts – home builders are more likely to buy these basic cabinets to more quickly install them, thus making a residence more ready sale.

Custom cabinets – those individually designed and crafted for installation in a home – saw the most rapid advances in 2021, growing 19.5% in that year. These advances were driven by the large number of homeowners who invested in kitchen remodeling projects during the COVID-19 pandemic. Consumers who had significant savings because of the pandemic – due to stimulus outlays and a lack of entertainment options – often put these funds in their homes. One way in which to do so was to upgrade their kitchens, installing custom cabinets with such features as pet beds, spice racks, and pull-out shelves.

Will these elevated kitchen cabinet sales continue in 2022?  Early indicators say “yes”. Home builders are continuing to erect houses as fast as they can as demand remains unquenched. Similarly, many remodelers expected continuing strong demand for their services – including kitchen renovations – as homeowners continue to invest in their residences. As of the December 2021 edition of The Freedonia Group National Online Consumer Survey, 30% of respondents reported that they were still doing more DIY home improvement and 13% were still hiring contractors for additional home improvement projects at an elevated rate than prior to the pandemic.  

For more information and discussion of opportunities, see The Freedonia Group’s study of the US cabinets industry, Cabinets, as well as the Freedonia Group’s extensive collection of off-the-shelf research, particularly our series of studies in the Construction and Building Products catalog. Freedonia Custom Research is also available for questions requiring tailored market intelligence.