FEA/Wood Markets 10th annual Global Softwood Log and Lumber conference—the virtual version, wrapped yesterday with six live Q&A sessions and a discussion on global mega-trends and their potential long-term impact post COVID-19. FEA’s current forecast calls for the overall economy to return to where it was in the fourth quarter of 2019—in the second half of 2022, whereas softwood lumber and other forest product consumption will regain their 2019-Q4 levels sometime in 2021. Underlying the FEA forecast are the following assumptions:

• Housing will outperform the US economy given the fundamentals of low interest rates, short supply, average age of housing and positive demographics. The latter refers to the what Brendan Lowney calls the “mega-trend to watch”—the significant, pending surge in the key 30-35 year old household-forming demographic.
• Employment recovery will struggle somewhat due to a second wave of lay-offs of higher earning employees,  as companies adjust their operations to fit the new economy. The bulk of current unemployment is concentrated in lower-earning employees.
• Due to a flair-up and other concerns in China and South Korea, reduced COVID-19 recovery optimism suggests the economy will experience sluggish growth until a vaccine is found and/or treatments are proven successful.

If no vaccine is forthcoming for several years (or ever), FEA is assuming the economy will already be open and will remain open with localized closures. The key assumptions being that communities will be quick to respond to flair-ups and know how to respond to them (e.g., social distancing, masks, etc.) and governments will not entertain shutdowns with current levels of economic pain.

Responding to a question on the outlook for a resolution to the softwood lumber dispute in the next year or two, Paul Jannke responded that the parties are further apart rather than closer together—given current markets, and although the increasing deposit levels and a change in government may revive the question, neither party seems motivated to resolve the issue at this time.