Article source: ConstructConnect
Since climbing interest rates are a primary concern governing the outlook for construction activity and since the reason interest rates are being adjusted upwards by the Federal Reserve and the Bank of Canada is to slow the economy and dampen demand for many consumer goods, the topic of runaway inflation has taken on huge significance.
The rapid price inflation currently being experienced in the U.S. and Canada has roots in supply chain bottlenecks; worker shortages and exaggerated wage hikes; and the deleterious impact of the war in Ukraine on energy markets.
But there’s another cause and, like most things economic, it has a self-correcting aspect that will soon be kicking in and serving to modify the official reported year-over-year advances in the Consumer Price Index (CPI), which currently stand at +8.6% in the U.S. and +7.7% in Canada.
That self-correcting feature relates to the mathematics of the year-over-year CPI calculation and the ‘low base effect’. For many items in the CPI, the outsized percentage gains in price this year are at least partly due to the early recovery levels they’re being compared with from last year.
