US Forest Industry Performance: September 2018

US forest industry performance in August and September was recently reported by both the US government and the Institute for Supply Management.

Total industrial production (IP) rose 0.4 percent in August (+4.9 percent YoY), its third consecutive monthly increase. Manufacturing output moved up 0.3 percent on the strength of a 4.0 percent rise for motor vehicles and parts; excluding the gain in motor vehicles and parts, factory output was unchanged. The output of utilities advanced 1.2 percent, and mining production increased 0.7 percent; the index for mining last decreased in January

New orders jumped by 2.3 percent, the largest increase in 11 months, mainly on a 69.1 percent surge in non-defense aircraft and parts. Excluding transports, new orders rose by a meager 0.1 percent (+7.7 percent YoY). Business investment spending tumbled by -0.9 percent (+7.5 percent YoY). The sharp drop in business investment was “disturbing,” Joel Naroff said, although he added “That component had been surging, so maybe a soft month here or there should be expected.”

The Institute for Supply Management’s (ISM) monthly sentiment survey showed that the expansion in US manufacturing decelerated (-1.5PP) in September, to 59.8 percent. By contrast, the pace of growth in the non-manufacturing sector accelerated (+3.1PP) to a record-high 61.6 percent. Of the industries we track, only Wood Products (which went unmentioned in the report) did not expand. Respondent comments included the following:

• “New residential construction market is still strong, with a good backlog of orders. Labor shortages and tariffs on materials continue to negatively weigh on earnings.”
  
• Paper Products. “Sourcing hourly workers for remote locations continues to be a challenge for both full-time and part-time opportunities. Have implemented a wide variety of recruiting techniques and suppliers to aid us in sourcing this hard-to-find talent.”

The consumer price index (CPI) increased 0.2 percent in August (+2.7 percent YoY). Increases in the indexes for shelter (0.3 percent) and energy (1.9 percent) were the main contributors to the seasonally adjusted monthly increase in the all-items index. The index for all items less food and energy rose 0.1 percent (+2.2 percent YoY), the smallest monthly increase since April.

The producer price index (PPI) declined 0.1 percent (+2.8 percent YoY), thanks to a 0.1 percent decrease in prices for final-demand services (especially from a 0.6 percent drop in transportation and warehousing prices). The index for final-demand goods was unchanged.

Forest products sector performance included:

• Pulp, Paper & Allied Products: +0.2 percent (+2.4 percent YoY)
• Lumber & Wood Products: -1.9 percent (+6.5 percent YoY)
• Softwood Lumber: -9.6 percent (+5.0 percent YoY)
• Wood Fiber: +2.3 percent (+6.7 percent YoY)