In the meantime, while the price declines filter into the consumer market, demand has cooled down.
“The do-it-yourself sector, it’s not as robust as it was a year ago when homeowners were locked down and using stimulus and travel money to do a lot of home improvement,” said Shawn Church, editor of Fastmarkets Random Lengths, a trade publication that covers the industry.
The professional homebuilding industry, the largest source of demand for lumber, is also decelerating from a breakneck pace, with some builders citing high prices for wood as a reason to hold off on construction.
Those decisions by consumers and companies are a major reason some analysts think the recent rise in inflation is the result of temporary mismatches in supply and demand, rather than a harbinger of runaway price increases stoked by all the money pouring into the economy.
The Federal Reserve has created trillions of new dollars since the coronavirus hit and kept interest rates at rock-bottom levels. At the same time, the federal government is running record deficits, driven by spending on relief measures like stimulus checks, enhanced unemployment benefits and small-business relief efforts in a bid to hasten the recovery from the pandemic.
Recent economic indicators have given credence to the idea that all that easy money will trigger inflation: In May, the Consumer Price Index, a broad measure of the costs of typical items that Americans buy, rose 5 percent compared from a year earlier — the fastest pace in 13 years.
But runaway inflation of the kind seen in the United States in the late 1960s and 1970s is a psychological process as much as an economic one. When inflationary expectations take hold, people become convinced that prices are on a never-ending escalator. They rush to buy now, at any price, and increases become a self-fulfilling prophecy.
Instead, the lumber market’s behavior is a sign of consumer sanity, said Kristina Hooper, chief global market strategist at the investment management firm Invesco.