Shares in forestry companies fall as U.S. housing stats show slowdown

Shares in several major TORONTO Canadian forestry companies closed down Wednesday after an analyst downgrade and lower-than expected building permits for the crucial U.S. housing sector.

CIBC analyst Hamir Patel said in a note that the bank has reduced its outlook on the industry, including downgrades on Interfor Corp., Resolute Forest Products Inc., and West Fraser Timber Co., as concerns mount about U.S. housing.

“With more warning signs flashing in the U.S. housing market … we are now moving to the sidelines on all commodity wood product stock,” wrote Patel.

Canfor Corp. closed down six per cent, Resolute ended down 4.5 per cent, Interfor down four per cent, and West Fraser down 3.9 per cent.

The shift came as the U.S. Commerce Department said Wednesday that applications for building permits, seen as a reliable indicator of future activity, fell by 5.7 per cent in August after a 0.9 per cent rise in July.

The reading is quite a bit weaker than expected and shows that permits have clearly faded from the cycle high in March, said BMO senior economist Robert Kavcic inanote.

“This is consistent with our view that residential construction looks to be largely a wash on overall economic growth at this stage of the cycle.”