Email of the day - on rising inflationary pressures
Comment of the Day

May 10 2021

Commentary by Eoin Treacy

Email of the day - on rising inflationary pressures

I am building a garage-workshop (2,200 sq ft) at my home in Arizona, in a mid-sized community (100,000 population spread out in 4 towns) which is experiencing the most rapid growth in its history, thanks to the socio-economic disaster in the state to our West (California). About 1,000 new homes are being constructed this year, with 9,000 additional already authorized by the county. Similar growth rates are happening in many other desirable parts of the country, like Austin, Texas and Boise, Idaho. 

My project is competing with this construction frenzy, and I am experiencing substantial delays in construction as high-quality contractors are beset with material delays and cost overruns, plus a labor market dramatically harmed by government handouts coupled with high labor demand. Real inflation should be measured using real facts and versus longer-term averages, not the current crap methods...

This article includes a letter from the CEO of a metal roofing manufacturing company - who does not mention (but maybe should have) how hard it is (read soon to be more expensive) to get and retain qualified employees... which I would add to the article to round out what it says...

[I believe the article can be freely republished with attribution.]

https://wolfstreet.com/2021/04/26/forget-2-inflation-with-margins-forcefully-squeezed-big-companies-are-raising-prices-and-point-at-massive-inflation-overshoot/

Eoin Treacy's view

Lumber, iron ore and copper prices have accelerated higher as investors binged on supply inelasticity trades. Prices are now getting to points where substitution demand is evolving. I priced the cost of a new kitchen hood cover over the weekend. It is now only marginally more expensive to have it done in stone than wood.

I’m reminded of the craze for adorning London’s landmark buildings with pineapples in centuries past. Limited supply creates demand but also incentivises new supply to come to market.

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