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In This Issue
2008: An Industry in Survival Mode
Housing Outlook
Steven Chu, Supporter of Cellulosic Ethanol, to Head Energy Department
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Economic Outlook: A Summary

The U.S. economy, now officially in recession, continues to act the part. Manufacturing activity and consumer spending declined noticeably during November, while companies shed jobs at the fastest pace in three decades. The U.S. dollar was supported by safe-haven buying, and remained strong against other currencies. This exacerbated a fall-off in exports and lowered crude oil prices. Although the housing market's funk deepened, affordability is improving to levels not seen in decades. Nonetheless, we expect only limited recovery in housing until employment increases.
 
2008: An Industry in Survival Mode
US Capitol Building 
No matter how you look at it, news from forest-related industries in 2008 has been bad all across the board. From one end of the supply chain to the other and one end of the country to the other, participants are retrenched and waiting, hoping to persevere until the economy turns the corner.

Not satisfied with current prices, landowners are withholding their timber from the market, waiting for higher prices down the road. Sawmills and panel mills are feeling the strain on both sides. On one side, the collapsed housing market has devastated demand. On the other side, supply is difficult to come by at what procurers consider reasonable prices (a result of landowners withholding timber from the market); the lack of available loggers to harvest the timber has led to supply disruptions as well.
 
Housing Outlook
 
Unstable HousingThe housing statistics for November 2008 were dire and depressing. They were so bad, in fact, that Lawrence Yun, the National Association of Realtors' chief economist, said November's price drop was the largest the association had ever recorded and probably the worst decline since the Great Depression.  Here's a snapshot of the market's performance in November:
 
Steven Chu, Supporter of Cellulosic Ethanol, to Head Energy Department
 
Dr. Steven ChuIn December, the Energy Information Agency (EIA) announced that the United States would not meet its targets to produce 36 billion gallons per year (BGY) of alternative fuels by 2022. The agency predicts only 30 BGY will be in use by 2022, a 17 percent shortfall. The key reason for the shortfall, according to Howard Gruenspecht, head of the EIA, is the "rate of development of cellulosic biofuels technology." In response to this news, the U.S. Department of Energy (DOE) announced that it will provide an additional $200 million in grants to help build pilot facilities (those using one dry ton of feedstock per day) and demonstration-scale cellulosic ethanol facilities (those using 50 dry tons of feedstock per day). Priority will be given to projects scheduled to be operational within 3-4 years with strong chances for rapid commercialization. Matching non-federal funding will be required: 30 percent for pilot plants and 50 percent for demonstration plants.
 
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