Producer Price Index: Sawmill lumber

The price of sawmill lumber is projected to rise by 5.7% in 2025, reaching an index value of 214.4. This increase is driven primarily by ongoing trade tensions with Canada, including expanded tariffs on nearly all lumber imports, which have elevated costs for imported supplies. Although construction activity, especially in the residential sector, remains muted because of higher interest rates that increase borrowing costs, slow housing starts, and major remodeling projects, restricted Canadian imports have provided upward support for domestic lumber prices. Despite only moderate demand growth, these trade-related supply constraints and elevated costs maintain pressure on prices throughout the year.

The price of sawmill lumber has demonstrated significant volatility from 2020 to 2025. Prices surged by 36.3% in 2021 as a combination of pandemic-induced supply shortages, heightened residential investment, and robust DIY home improvement activity contributed to record-high prices. Further compounding these spikes, tariffs on Canadian wood and supply chain disruptions limited the availability of lumber, putting upward pressure on prices. Inflationary pressures began to weigh on consumer spending and the real estate market, resulting in a decline in lumber prices. As interest rates rose and economic uncertainty heightened, the pace of new construction slowed further, reflected in volatile pricing throughout the year. This downward trajectory accelerated in 2023, with prices falling 25.4% from the prior year's peak as recessionary fears and mounting affordability concerns suppressed construction investment. Volatility persisted into 2024, with further risks posed by continued recessionary fears, keeping the market on edge and prices relatively unstable.

Broader macroeconomic conditions, such as inflation trends, interest rate policy, and global trade relations, have played a key role in shaping the price landscape over this period. Elevated interest rates have continuously dampened both residential construction and major remodeling, primary drivers of lumber demand. Trade measures, particularly US tariffs on Canadian lumber, have continued to distort price formation by raising import costs and increasing domestic suppliers' market power. Pandemic-related disruptions in production, labor, and logistics contributed to both historic price surges and rapid corrections as supply and demand rebounded at different speeds. These conditions highlight the sensitivity of sawmill lumber prices to external shocks, whether economic, geopolitical, or public health-related.

From 2020 to 2025, the net effect of these trends has been a CAGR 0.8% growth in the price index. Despite the extreme price swings, long-term growth has moderated as market forces gradually adjust to a new equilibrium marked by fluctuating demand and persistent trade frictions. The period underscores the importance of both construction trends and international trade policy in determining the direction of lumber prices.