British Columbia - logging truck north of Rosewood Cedar Valley

Two property sectors, a world apart; two materials, wood and metal, may hold the key to the global economy. Consumers are the dominant force in the US economy and they like a sturdy housing market. April existing home sales released on 21 May 2015 will complete the week’s trio of housing-related data. Hopefully they will dovetail with the recent report that showed homebuilding jumped 20 percent compared with March, as the sector emerged from a winter weather-induced slowdown.

The news has revived lumber prices. Lumber in North America is used mainly in homebuilding and thus, when supply is relatively static, can be seen, if you squint, as a decent economic growth proxy.

Since hitting a three-year low on May 12, the Chicago Mercantile Exchange Lumber future is up 11 percent. The S&P 500 homebuilder index is up 5.5 per cent over the same period.

Meanwhile, over on the Shanghai Futures Exchange, the Steel Rebar future contract has just fallen for the seventh session in a row.  The price of rebar, which is used in construction and is thus a guide to the health of China’s property sector, is now just above its record low.

The reduced demand for steel is impacting inputs such as iron ore, where prices have also been under severe pressure of late.

China is striving to move away from its steel-hungry development phase. But too sharp a contraction in construction bodes ill, globally.

Source: Financial Times.com (Edited)