The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for December 2016 jumped 1.1 percent to $31,236 as unexpected strength in wood commodities lifted the total Index. The stock market has been on a tear since the election and many in the supply industry believe that the proposed infrastructure spending could be a boom for commodities. It remains to be seen if this will occur or if higher interest rates quell any such rally. As of now, suppliers and manufacturers are feeling optimistic.
For mid-December, the notable movers in the Whole House Commodity Index were the following:
There was a lot of pricing activity in December and this may indicate that manufacturers and mills are preparing for an inflationary period in 2017.
The Canada—United States Softwood Lumber Agreement is somewhat in shambles and there is a real possibility that countervailing duties could be put on spruce lumber entering the United States from Canada by late spring. Given the shift in the country’s policy under the new administration is seems highly likely this will happen. The rub for builders is this duty could potentially raise lumber prices and shift the demand equation. Tariffs and trade wars could be very bad for pricing next year and interest rates really could be the wild card.
Hang on—it could get bumpy in 2017.
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index is based on wholesale costs of the base components to build a 2,200 square foot wood frame home with a concrete stem wall in Central Florida. The Index includes foundation, metal, concrete, block, stucco, cement, wood framing, siding, sheathings, trusses, roofing, drywall, insulation, windows, doors, trim, garage doors, and most building hardware. It does not include décor, electrical, plumbing, mechanical, landscaping, or labor. Because the Index uses current wholesale costs, this should be a strong indicator of the direction of building prices for the next 30-45 days.
Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida. Go to www.romaclumber.com to sign-up for the Index and other free market reports. To sign-up for this information via email, contact Rebecca Ballash at