30 Mar INFLATION PRESSURES
In Georgia, many things are returning to normal. For example, weekend traffic on the roads is back and close to the congested experience prior to the pandemic. Comments about workday traffic include similar observations. The expected impact will be an increase in the truck traffic delivery times.
We also understand that shortages of select materials are again becoming an issue. A grading contractor shared with us that corrugated metal pipe and concrete pipe are now in high demand. Suppliers are having difficulty keeping up with orders. We have also been told by one supplier that the auto industry is expecting a shortage of sheet metal material. The suppliers are sharing that the auto industry has purchased whole production runs of sheet metal in anticipation of the shortage. If this is true, expect the cost of metal piping, door frames, metal studs, and ductwork to increase.
Timber prices have continued to rise. The Atlanta Journal March 29th article indicates that lumber has increased from $351/MBF in January 2020, to $1,030/MBF today. Suppliers are now asking home builders to “pay in full” when placing an order to maintain their place in line for when the order arrives at the warehouse.
Structural Steel prices are also on the rise. Recent discussions with a fabricator indicate that steel plate material has doubled in cost. His comment was they are redesigning their members and connections to minimize the impact.
What is not clear is the impact on the labor component of the construction industry. The pandemic has not reduced the demand for construction labor. Based on the January Census Bureau numbers, construction workers currently average $32.11/hour. This is the highest level ever recorded. The impact of the current administration’s immigration policy enabling more potential workers to enter the country illegally will be soon become apparent. Historically, these illegal workers find employment in nonunion sections of the country. Their participation in the workforce often provides downward pressure on wages.
The impact due to the Suez Canal situation will have a significant impact on European goods getting to Asia and vice versa. Crude oil shipments are also affected. The total impact on US markets is still to be assessed. Most goods received from the far east come via the Pacific Ocean and European goods travel the Atlantic Ocean. The pricing impact of European and Asian manufactured goods due to the delays is not yet known.
Consideration for the impact of shipping schedules should also be examined. Ships that were due to pick up their next payload will be late due to being stranded waiting on clearing the Suez Canal. The ever-increasing delay of ships will undoubtedly add to the current shortage of shipping containers. Each of these factors will increase shipping costs.