Lumber futures fell as much as 3% on Wednesday to $ 859.8 per thousand board feet, prolonging the drop below $ 900 as the commodity’s price the rally continues to calm down.

Lumber prices have jumped throughout the pandemic as supply bottlenecks and growing demand for housing construction have pushed up lumber futures contracts. Now prices are trading nearly 50% below their May 10 high of $ 1,711 per thousand board feet.

Over the past 12 months, however, lumber is still up over 107%.

The increase in supply is partly responsible for the recent slowdown in lumber. Lumber production in the United States has jumped 5% in the past 12 months with another 5% increase underway, according to Domain Timber Advisors LLC, a subsidiary of Domain Capital Group, by Bloomberg.

Soaring lumber prices was one of the first indicators for many investors that inflation could rise too quickly as the economy emerges from the pandemic. Now, the decline in lumber is signaling some that inflation will ultimately prove to be temporary, as the United States

Federal Reserve
insisted. Head of the Fed Jerome Powell reiterated this point of view at his press conference last week, and again during Congressional testimony on Tuesday.

“The idea is that prices like that, which have gone up very quickly due to shortages and bottlenecks etc., should stop rising. And at some point, they should, in some cases, go down. And we’ve seen that in the lumber case, ”Powell said.

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