North American Lumber Market - 1-15th August 2007

North American Lumber Market

1-15th August 2007

Canada expects lower growth of household furniture market
This third article of a four part series covers trends in the
Canadian household furniture market. The business sector
in Canada is performing better than in the US. GDP has
been progressing at a rate of 2.8% in 2006. However, the
economy will likely lose speed this year, advancing at an
anticipated rate of 2.5%.

Personal income growth advanced at a healthy pace of
6.1% in 2006. In conjunction with the US economic
slowdown, it will decelerate to about 5.0% over the next
two years. Much of the growth was due to higher prices.
Growth of real disposable income in 2006 was 4.9%.
Growth will be much slower in 2007 and 2008, estimated
to be only 3.9% and 2.9% respectively. This modest
performance will occur despite the promised income tax
cuts by the government.

The Canadian residential housing market was still healthy
in 2006. It advanced 2.1% (on a value basis), down from
3.5% the year before. However, the market is saturated
now and demand is waning. We predict zero growth over
the next two years. If mortgage rates continue to climb it
may even be negative. In unit terms, it would represent a
drop from 228,000 in 2006 to 205,000 this year.

Canadian consumer spending is an important positive
force contributing to the economy’s overall growth. It rose
at an annual rate of 4.0% during the past two years. Due
to the slowing economy, a growth rate of 3.6% in 2007
and less than 3% in 2008 is anticipated.

Expenditures for durable consumer goods (which includes
furniture) are quite buoyant. Growth stood at a healthy
7.1% in 2006 up from 5.3% in 2005. However, as
consumer confidence is declining, durable consumer good
sales may advance by only 5.5% this year, and possibly as
low as 3.0% next year.

The Canadian furniture market (at retail prices) has been
advancing continuously since the third quarter of 2002.
Growth stood at 9.1% in 2006. For 2007, the market may
slowdown to a rate in the 7.0% range, and 6.5% for 2008.
The size of the Canadian furniture market in 2006 stood at
C$ 11,078 million (evaluated at retail prices) and it is
estimated that the market valuation will reach
approximately C$ 11,875 million this year and C$ 12,632
million in 2008.

Abbreviations

LM Loyale Merchant, a grade of log parcel	Cu.m Cubic Metre
QS Qualite Superieure	Koku 0.278 Cu.m or 120BF
CI Choix Industriel	FFR French Franc
CE Choix Economique	SQ Sawmill Quality
CS Choix Supplimentaire	SSQ Select Sawmill Quality
FOB Free-on-Board	FAS Sawnwood Grade First and
KD Kiln Dry	Second
AD Air Dry	WBP Water and Boil Proof
Boule A Log Sawn Through and Through	MR Moisture Resistant
the boards from one log are bundled	pc per piece
together	ea each
BB/CC Grade B faced and Grade C backed	MBF 1000 Board Feet
Plywood	MDF Medium Density Fibreboard
BF Board Foot	F.CFA CFA Franc
Sq.Ft Square Foot	Price has moved up or down

Source: ITTO' Tropical Timber Market Report