Oil shock, housing, and trade uncertainty in focus at MWC: part I
Oil shocks, inflation and a softening economy are converging at a critical moment for North America, with potential ripple effects for the forest products sector, Benjamin Tal of CIBC Capital Markets told delegates at the Montreal Wood Convention.
Industry leaders outline risks and shifts for forest products sector
Speaking to a standing-room-only crowd on April 15 at the Fairmont Queen Elizabeth in Montreal, Tal outlined global and North American trends, including interest rates, inflation and broader market dynamics, with insights for decision-makers navigating uncertainty in the wood sector.
The deputy chief economist at CIBC described the current moment as one of “normalizing the abnormal.”
He said it is the policy response to oil shocks that ultimately drives downturns.
Tal said the impact of an oil shock depends on several factors, including the state of the oil market and
the broader economy before the disruption, as well as the magnitude and duration of the shock.
Despite the disruption, Tal suggested the situation may not be prolonged, given the economic pressures facing both sides of the conflict and the approaching Nov. 3 U.S. midterm elections.
“Maybe I am optimistic here – Iran and the U.S. are desperate for some sort of resolution. Iran cannot last with a situation in which they don’t have any oil money. They need to compromise. Trump cannot afford $150-a-barrel oil – [that’s] $5-a-gallon.”
Every time we’ve had an oil shock, five minutes after, we had a recession. I want you to pay attention … 1973, with the oil embargo, we had a recession. The double-dip recession in 1982 was after an oil shock. In 1991, an oil shock … even in 2008, the mother of all recessions – the financial crisis was led by an oil shock when oil prices went up to $120.
The “efficiency paradox”
Tal said the push toward greener energy and improved efficiency has led some to believe economies are less vulnerable to energy shocks.
He explained that gains in efficiency often lead to higher overall consumption, as lower costs encourage increased use.
Food prices are already running roughly 20 per cent above trend, Tal said, with the oil shock expected to add further inflationary pressure.
Labour and housing markets
Tal said the U.S. labour market is showing signs of slowing, with hiring rates falling below pre-pandemic levels.
High interest rates are also weighing on the housing market, he added, slowing activity and reducing affordability.
“So housing starts are slowing down, housing activities are slowing down and people can’t afford their mortgage.”“In Canada, for the housing market, the major factor impacting your business is in a recession.
But it depends what kind of housing market.
The main issue is that what we are seeing now, and this is very important to understand, is not a correction – it’s an adjustment.”
Tal said national benchmark home prices have largely returned to pre-pandemic levels. He noted a divergence within the market, with the condo segment in a downturn while low-rise, single-family housing remains relatively stable.
Population growth is also shaping housing demand, he said. He warned that a slowdown in construction could create future supply shortages.
The future of CUSMA
Tal said geopolitical tensions could influence upcoming negotiations around the Canada–United States–Mexico Agreement.
He suggested rising oil and food prices may limit the appetite for additional inflationary pressures, such as tariffs, increasing the likelihood of compromise.
He said the impact on Canada will vary by sector, with
dairy most exposed, followed by lumber, while energy is less likely to be affected.
“Clearly, we have to realize that we are trying to normalize the abnormal. I believe that 2026 should be seen as a transition year between something bad and something better because what was normal in the past is not normal in the context of today’s economy,” Tal concluded.
Stay tuned for Part II . . .
Story by Jennifer Ellson
As part-time Managing Editor of Madison’s Lumber Reporter, Jennifer brings deep forest industry knowledge and editorial expertise.
Jennifer plays a key role in delivering the in-depth market insights Madison’s readers rely on.