Forestry-related Industry Performance At a Glance: September 2009

Wood Products output ticked up by 0.7 percent in July, the second consecutive month of increases; activity in that sector remains 23 percent below year-earlier levels. Paper manufacturing activity rose for a third month, although July’s 0.6 percent advance was muted when compared to the two prior months; activity in the Paper sector is nearly 12 percent lower than the levels of July 2008.

Capacity utilization in the Wood Products and Paper industries extended gains, by 1.1 and 0.7 percent, respectively. Compared to July 2008, Wood Products capacity utilization is off by approximately 21 percent, while Paper is off about 10 percent.

Shipments from Wood manufacturers jumped by 1.4 percent, while Paper shipments were flat for a fourth consecutive month.

Paper manufacturing inventories fell by $94 million (-0.7 percent) in spite of higher output and flat shipments. In both cases, seasonal adjustments are the likely culprits for the counterintuitive inventory changes. Wood Products was the “oddball” in that both output and shipments increased – shrinking Wood inventories by $50 million (-0.6 percent).

The only bright spots for Wood Products are in new orders and inventory levels (Table 1). Uncertainty about the long-term sustainability of the rally is reflected in comments by an unnamed manufacturer. "Regarding the uptick in the manufacturing index: from where I’m sitting I don’t see it as an increase in demand for our products, but rather a rebuilding of inventories from an oversold position. We’ve seen a bounce off the bottom in May that has been carried through this month but it appears to be leveling off.” That anonymous correspondent’s remarks notwithstanding, the picture looks quite bright for Paper Products, as virtually all categories of the most recent survey point to additional anticipated activity.

Performance Overview of Wood and Paper Products

Source: Institute for Supply Management, August 2009