Inflation is losing on all fronts, and economists are starting to dust off seldom-used theories about the dangers of deflation. Yet deflation traditionally is associated with depressions and is not a mature market that is operating near the top of its game. And while a round of price cuts may be a tempting way to save money on a project, it could also quickly destabilize the recovery. Widespread falling prices can lead to a reduction in capital and investment and quickly turn into an economic tailspin. Nevertheless, ENR's First Quarterly Cost Report looks at a number of materials producers that are adding production capacity just as demand passes its peak.
Nonferrous metals are particularly vulnerable.
And you can add cement to that list, with Skokie, Ill.-based Portland Cement Association tracking 26 plant modernizations and showing four new plants on the drawing boards. That could bring up to 11 million tons of new capacity on stream by 2001, says PCA Economist William Toal. Lumber prices are down and could stay down. The National Association of Home Builders forecasts a slowdown in the housing market during 1998, just as the important Asian export market dries up. Lumber is one of many markets that may be affected by the Asian financial crisis.