by Calculated Risk on 3/20/2007 06:44:00 PM
Tuesday, March 20, 2007
Lumber and Recessions
Bill Fleckenstein recently received this email:
"Our business is a large hardwood sawmill (sawing oak, maple, cherry, ash, etc., for the furniture (read: HOUSING) industry. We usually enter recession five to six months ahead of the rest of the economy. IT'S HERE! Prices for green and finished lumber are falling at a faster rate than at any time since 1974."Typically lumber and housing move together, so it is not surprising that those in the lumber industry would feel they "enter recession five to six months ahead of the rest of the economy".
Posted with permission.
Click on graph for larger image.
This graph shows New Home Sales vs. Recessions for the last 35 years. New Home sales were falling prior to every recession, with the exception of the business investment led recession of 2001.
Lumber, along with New Home sales, and starts and completions all tell us basically the same thing; the housing market is in a deep recession - and we should be concerned about the general economy.