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Economic Outlook: A Summary
The general economy in the U.S. will continue to contract in 2009, with predictable impacts on employment and consumption. Oil prices will remain low (around $35/barrel) through April, but they will then trend higher for the rest of the year. Despite lower transportation costs, reduced demand and a stronger dollar have put a dent in exports of U.S.-manufactured forest products. The housing market shows some signs of turning a corner. Two indexes published by the National Association of Realtors indicate we are near the bottom: the Housing Affordability Index, which shows that homes are more affordable now than at any time in the last 25 years, and the Pending Home Sales Index, a forward-looking indicator based on signed contracts, which was revised upward for November and rose 6.3 percent in December. While housing may begin a recovery in 2009, however, the way back will be slow and far from smooth because of weakness in the general economy.
For a performance overview for Wood and Paper Products in January, click here. |
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Wood and Paper Manufacturers Right-Size Output |
Manufacturers of durable goods have been struggling to match output with demand. Overall, new orders fell 2.6 percent in December, the fifteenth month in a row that the number has declined. Shipments fell as well; they were down one percent in December. Despite lower demand, inventories of durable goods increased to the highest level since 1992.
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Time2Manage |
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From forest-related industries, this recession has taken much--customers, livelihoods, legacies and ways of life. About the only thing it has given us is time. As the sound of hammers and nail guns ceased and sawmills and chain saws stopped humming, many of us have been presented with the time to think proactively about our businesses. One of the keys to survival will be spending this time wisely.
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Recovery: Stimulus Bill & Foreclosure Plan May Help Rebuild Housing Market |
 In January, the new residential construction numbers continued on trend, with permits, starts, and completions all falling. Permits declined by 4.8 percent from December's level, a whopping 50.5 percent drop from January 2008. Housing starts fell 16.8 percent from December to 466,000. Year-over-year, starts have fallen 56.2 percent from January 2008's level. Housing completions had an even more dismal decline, down 24.2 percent from December and 41.7 percent from January 2008.
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Reinvestment: Biomass Measures in the Stimulus Bill |
One particularly helpful provision of the American Recovery and Reinvestment Act of 2009 is the extension of and alternatives to the production tax credit. Companies producing electricity from biomass can either:
- Take a production tax credit (PTC) through 2013, OR
- If placing a facility in service between 2009 and 2013, they can elect to take an investment tax credit of 30 percent instead of a PTC, OR
- If they begin construction in 2009 or 2010, they can opt for an up-front grant from the government in the amount of 30 percent.
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Bioenergy News |
 Until September 2008, announcements of new bioenergy facilities were flying around like livestock in a strong tornado. In our conversations here at Forest2Market, we often wondered if the laws of gravity and the realities of manufacturing--huge capital costs, financing difficulties, drawn out permitting processes and a 50 percent "go live" rate--still applied. In the last quarter of 2008, we saw a dramatic decrease in the number of new bioenergy facilities announced and multiple deadlines passed for plants that never made it off the ground.
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