Sinking lumber is bad news for the economy

Lumber keeps tumbling. (See above chart. Click on the chart to enlarge it).
This is bad news. Why? Because lumber is an excellent leading indicator of the housing sector.
The price of lumber leads housing starts by several months. Its protracted weakness suggests the housing sector will be much weaker.
Why do we care? There are three main reasons. The first one is housing prices will rise very slowly. It will have a depressing effect on consumers.
The second reason is the housing sector is an important part of the US economy. Its slowdown will be a major headwind for business activity.
And the third reason is business profitability will suffer, as it usually does, when the economy grows slowly.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months.

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