Beyond the Build

Commodities Pricing

Lumber Spikes Again, But We’re Still in the Game

While the CPI has risen about 5% over the last 12 months–the highest increase in decades–the 30-year T bills are hovering just north of 2%. One has to wonder why folks outside the construction industry are not more concerned. Someone explained it to me like this:

Have you ever been to a football game and witnessed the sudden deluge of demand at concession stands when halftime hits? Nothing has fundamentally changed. There are the same number fans watching the game and the same number of folks behind the counter selling the same stuff, at the same price as when no one was in line. How many times have you been in one of these lines and thought: “Could they possibly move any slower? Shoot, I would pay twice what they are asking if I didn’t have to wait.” Depending on the severity of the situation and the length of the line, you really might be willing to do so. However, is that the new clearing price for a soda and hot dog? Let’s call it thehalftime price,” which seems like what we are experiencing right now.

While it’s painful, it seems our central bank does not see any significant long term inflation. I am hearing that we are seeing is due to pent up demand related to coming out of the virus, workers not getting back on the job more quickly, stimulus money and a few other things I noted here. A surge in demand has swamped supply chains and distribution networks. However, it shouldn’t be a long-term problem. In the end, our central bank has to play the entire football game, not just the first two quarters.

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Merrill Stewart Jr.

Merrill Stewart is Founder and President of The Stewart/Perry Company, a commercial building contractor based in Birmingham.