The magnitude of these price increases and the appearance of material shortages should make the Federal Reserve Board nervous. But cost data from ENR shows construction industry price escalation running hugely higher. The inflationary gun is clearly loaded with some big caliber ammo. Housing, nonresidential and heavy construction are all at record levels and generating tremendous domestic demand for labor and materials. The gun has a hair trigger that could set off a volley with any new market disruption.
Some economists argue that a new economic order is at hand.
But we say that the laws of supply, demand and price still hold sway and that they must all be in equilibrium to have stable prices. That is not the case today. It may be only a matter of time before the Fed takes action to cut demand. The cyclical nature of construction has been played out many times before. But the triggering event and timing almost always comes as a surprise.