Lumber, wheat, and oil: Tumbling prices could mean the worst of inflation is over
For much of the last few years, watching the price of lumber has been painful for anyone working on their home.
Lately though, the cost has come sliding down alongside many other commodities — yet another sign that rampant inflation could be coming to an end or at the very least, offer some reprieve for those struggling with the soaring cost of living.
Lumber and framing account for about 10 to 15 per cent of the total cost to build a new home, said Mace Mortimer, co-owner of Alloy Homes, a Calgary custom homebuilder.
“Lumber prices at their worst were about 300 per cent higher than normal. Now, that was back in March and April of this year. They’ve softened a little bit and have come back down,” he said.
‘It’s peaked’
Many other construction products are still higher than normal and the shortage of skilled labour is noticeable. Still, Mortimer thinks the worst of inflation is behind the industry.
“I think it’s peaked,” he said. “And I think it should hold.”
In the United States, new figures released Wednesday show inflation could be peaking as the rate fell from 9.1 per cent in June to 8.5 per cent last month.
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Besides lumber, many other commodities are on the decline such as oil, which is one of the biggest drivers of inflation. A barrel of crude is down about 20 per cent since June.
Copper has fallen about 25 per cent since March, while many crops are also tumbling in value. Canola and corn have both lost 25 per cent of their value since May, while wheat has tumbled 40 per cent.
“Two or three months ago, we had crop prices either at all-time highs or very close to all-time highs, depending on the crop. Almost across the board we’ve now seen a pretty substantial pullback [in prices],” said Jonathon Driedger, a Manitoba-based analyst with LeftField Commodity Research.
Food prices are dipping
Those changes in prices may take a few months before they can be seen at the grocery store, although food prices are already falling around the world, according to the United Nations.
Real estate prices have also been a major reason for escalating inflation across the country. Rental rates are still elevated, but housing prices that soared during the pandemic are now sliding in many cities across Canada.
There is cautious optimism that inflation in Canada may have peaked as price growth for things like oil, lumber and real estate begins to decline.
Calgary Realtor Hong Wang sold a house about six months ago to a couple from Vancouver. Instead of moving in, they recently decided to stay put in Vancouver and put the property back up for sale. During that time, however, the market has cooled and Wang said it will be tough for the couple to recoup their money.
“We haven’t sold it yet, so it’s the same house [but] different market,” she said.
All this is leading to hope that next week’s Canadian inflation numbers might show signs of improvement. As they look over commodity, job and real estate data, among other statistics, some economists expect the inflation rate to decline after hitting 8.1 per cent in June.
Still, at this point, experts say it’s difficult to know definitively whether rampant inflation is over.
“The reason why inflation is high is because energy prices are high and because home ownership costs are high and those are two developments that are subject to a lot of uncertainty, energy in particular,” said Trevor Tombe, an economics professor at the University of Calgary.
“So where we go from here is anybody’s guess.”
Falling commodity and real estate prices should provide some reprieve for consumers. And if those lower prices hold — especially for oil — Tombe expects the inflation rate to return to normal through next year.