The purpose of this spotlight is to flag one of the potential spoilers for the housing recovery over the next few years: above trend economic growth that fuels an escalation in the inflation and interest rates. We seem to have arrived at an inflection point. A few years ago, the Federal Reserve (Fed) was concerned about slow growth and deflation. As a result, Fed policymakers cut interest rates to zero and started purchasing government long-term securities to drive long-term interest rates lower as well. The Fed’s concern is now correctly focused on how to avoid excessively high economic growth that might push the inflation rate above the desired target of 2% per year.
Great Results in 2016; Even Better in 2017
The improving dynamics in almost all global markets positively impacted the timberland and lumber producers in the major importing and exporting countries in 2016 and again — even more significantly — in 2017. Expanding demand and high prices have been key themes for lumber producers and exporters, with some strong earnings being recorded (particularly by U.S. producers).