Although Federal Reserve Chairman Jerome Powell has acknowledged that Americans are facing higher prices, he continues to believe that inflation would be temporary, citing timber prices as evidence.
The central bank chief admitted that inflation is here when testifying before a special House hearing on Tuesday. As examples, he cited airline fares, hotel rates, and lumber pricing. Prices have risen as a result of post-pandemic demand, supply chain challenges, and bottlenecks, but Powell believes they will not endure, citing lumber prices as one example.
Lumber prices have risen more than 260 percent in the last year due to pandemic-related spending and industrial supply chain difficulties. Prices, on the other hand, have plummeted by nearly half in the last two months. Powell and other central bankers can see from the surge and fall pattern that these short-term inflation spikes will pass.
Powell feels that the rollercoaster price chart for lumber demonstrates that labour shortages and bottlenecks are short-term concerns related to reopening efforts. Higher pricing will only last a short time.
“We anticipate that the current high-inflation figures will begin to decline. And it’ll be similar to the lumber experience,” Powell said at a press conference after the Federal Open Markets Committee meeting in June. “Prices that have risen rapidly as a result of shortages, delays, and other factors should come to a halt. And, in some circumstances, they should actually go down at some time. That was seen in the case of lumber.”
Sawmills halted output and furloughed staff in March 2020, preparing for an economic recession. As a result of the housing market boom that followed that summer, demand for lumber was great, but supply was limited, causing prices to skyrocket. Lumber was nearly treble the pre-pandemic price of $460 per thousand board feet in May. Prices have begun to level out as the reopening process proceeds.
The largest US lumber company, Weyerhaeuser, recorded its highest first-quarter results since the housing bubble burst earlier this year. During the first quarter of 2021, the corporation made a profit of $681 million.
Demand for lumber was high due to the housing market boom that followed that summer, but supply was limited, causing prices to rise. In May, the price of lumber was virtually trebled from its pre-pandemic level of $460 per thousand board feet. As the reopening process progresses, prices have begun to level out.
Weyerhaeuser, the world’s largest lumber firm, had its best first-quarter results since the housing bubble burst earlier this year. The company had a profit of $681 million in the first quarter of 2021.