Lumber, wheat and oil: Falling prices could mean the worst of inflation is over

For much of the past few years, watching the price of lumber has been a pain for anyone working on their home.

Lately, however, the cost has been falling alongside many other commodities – another sign that runaway inflation may be coming to an end or, at the very least, providing respite for those battling the skyrocketing cost of life.

Lumber and framing make up about 10 to 15 per cent of the total cost of building a new home, said Mace Mortimer, co-owner of Alloy Homes, a Calgary custom home builder.

“At worst, timber prices were around 300% higher than normal. Now it was March and April of this year. They softened a bit and came back down,” he said.

“It is the height”

Many other construction products are still above normal, and the shortage of skilled labor is noticeable. Still, Mortimer thinks the worst of inflation is behind the industry.

“I think he peaked,” he said. “And I think that should hold.”

In the United States, new figures published on Wednesday show inflation could peak as the rate fell from 9.1% in June to 8.5% last month.

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Rising interest rates are one of the reasons real estate prices are cooling, says Hong Wang, a Calgary real estate agent. (Colin Hall/CBC)

Besides lumber, many other commodities are in decline, such as oil, which is one of the main drivers of inflation. The barrel of crude has fallen by around 20% since June.

Copper has fallen around 25% since March, while many crops are also falling in value. Canola and corn have both lost 25% of their value since May, while wheat has fallen 40%.

“Two or three months ago, crop prices were either at historic highs or very close to historic highs, depending on the crop. Almost in every area we have now seen quite a significant setback. [in prices]said Jonathon Driedger, a Manitoba analyst with LeftField Commodity Research.

Food prices fall

These price changes can take a few months to show up 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 the escalation of inflation across the country. Rental rates are still high, but housing prices that soared during the pandemic are now falling in many cities across Canada.

WATCH | Consumers are feeling some respite from soaring inflation:

Inflation shows signs of slowing as prices of some commodities fall

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 real estate agent Hong Wang sold a house about six months ago to a Vancouver couple. Instead of moving in, they recently decided to stay in Vancouver and put the property up for sale. Meanwhile, however, the market cooled and Wang said it would be difficult for the couple to get their money back.

“We haven’t sold it yet, so it’s the same house [but] different market,” she said.

All of this raises hopes that next week’s Canadian inflation figures could show signs of improvement. Looking at data on commodities, employment and real estate, among other statistics, some economists expect the inflation rate to decline after reaching 8.1% in June.

Soaring oil prices have been a major driver of rapid inflation in Canada and other parts of the world. In recent months, however, oil prices have fallen. (Kyle Bakx/CBC)

Still, at this point, experts say it’s hard to know for sure if runaway inflation is over.

“The reason inflation is high is because energy prices are high and 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 anyone’s guess.”

Falling commodity and real estate prices should provide some respite for consumers. And if those lower prices continue — especially for oil — Tombe expects the inflation rate to return to normal next year.

About Martin Aaron

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