General Economics

erhaps the most dramatrc economic display in the lumber trading scene this past year has been the reaffirmation of the sensitivity of the lu market to changes in levels of housing starts.

By Tim Llndgren President United Wholesale Lumber Co. Montebello, Ca.

While forecasters at all levels of government and commerce have predicted a diverse range of activity levels for the economy in general and the lumber market specifically, the fortunes of the lumber economy have paralled very closely the rise and fall in "housing starts". This has been true at all levels in the production and sales of lumber items and eventually reaches across the full

Story at a Glance

Housing starts at the 1.7 million rate by late'75 .... moneywill remain hard to get, prime rat at goh by mid-year,... unempfoyment wif f go over 7Yo, dropping back to under 6% in spring , a strong general upturn by mid to late'75.

spectrum of lumber merchandising including specialty items which may be one or two steps removed from the basic construction category.

In considering a prediction for 1975, the following economic factors will have an important bearing on the overall climate of lumber trading activity:

I Housing starts will continue to decline in 1974 as reflected by the current decline in building permits of 8.4%, but will rise steadily during mid to late 1975 to a rate of 1.7 million by year's end as government subsidies take hold and more attractive mortgage rates are available.

I Money will remain hard to get but will slacken somewhat with the prime rate levelling at 9% by mid year.

Leading economic indicators for September declined 2.5%sharpest in 23 years.

I Unemployment currently at 6% will rise to an excess of 7 .0% by year's end. It will, however, drop back to under 6% in spring.

I G.N.P. has declined by 2.9% in 3rd quarter representing the 3rd successive quarterly decline; certainly flirting with recession definition.

The above factors in summation portray a continuing softening of the economy in general for the balance of the year and well into 19?5. At that time it is felt that the stimulants which will be injected into the economy will be taking effect and will lead to a strong uPturn in mid to late 1975.

These general economic conditions will place additional stress on the producer and distributor of lumber products. More than ever management stamina and astuteness will be tested.