Despite a sharp decline in lumber exports in the first quarter of this year, New Brunswick's forest products sector may soon rebound as fragile green shoots of economic recovery begin to sprout across North America.

Enlarge Photo Noel Chenier/Telegraph-JournalA skidder hauls logs. Forest products are now nine per cent of the province’s GDP, previously they were at 12 per cent. Housing exports in the United States have hit rock bottom and Canadian exporters of lumber and construction materials have now seen the worst of the downturn, according to the Conference Board of Canada.

"U.S. housing starts and automobile sales, currently at rock-bottom levels, can only rise - albeit slowly," said Pedro Antunes, author of the Ottawa-based think-tank's Canadian Outlook Summer 2009, released Monday. "Canadian exporters of automobiles, lumber and construction materials have been through the worst of the business cycle."

Given roughly 75 per cent of New Brunswick forest products are shipped to the United States, a turnaround in the economy will help restart idle mills, said Mark Arsenault, president and CEO of the New Brunswick Forest Products Association.

"Whenever the downward curve starts to level off it's a positive sign," he said. "But some of the mills still have wood in their yards so if it's a large inventory it may be a while before they restart."

Because several sawmills have shuttered across the country, Arsenault said the forestry sector may recover more quickly from the recession than other sectors.

"In theory recovery should be faster," he said. "There are fewer sawmills across Canada so as demand increases there will be less supply than five years ago and prices should move up more rapidly."

But Arsenault said it will take a booming economy before forest products - now nine per cent of the province's GDP - return to their heyday at 12 per cent.

Despite a return to growth in the U.S. housing market, a bounce-back in commodity prices and government stimulus spending estimated to be $80 billion over two years, the Conference Board report warns that the effects of the global recession will linger into 2010 and recovery will be slow.

"The current recession is so widespread that its effects are expected to linger for longer than the typical business cycle," Antunes said. "Although the U.S. economy is forecast to return to growth in the second half of this year, battered American consumers will be saving more of their incomes in the foreseeable future."

In Canada, the Atlantic provinces have been more stable throughout the downturn and may have even benefited from the slowdown in Alberta and British Columbia.

"Because these economies are weakening, Atlantic Canadians are staying home, which is driving the domestic economy," Atunes said. "It's counter-cyclical."

The summer outlook also said businesses are coping with a volatile Canadian dollar - or "petro-loonie." The Canadian dollar is forecast to average 86 cents US this year and continue to appreciate in 2010 as commodity prices head higher.

The strengthening loonie may put a snag in the forest sector's recovery in New Brunswick, said Arsenault.

"But we've managed through a high dollar before," he said. "The real issue now is the lack of demand for products."