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Is rising inflation a flash in the pan?

The biggest survey of CFJ readers in recent history shows there’s real fear about the way prices are increasing in the wake of Covid-19 and Brexit.

IN a forthcoming edition, we’ll be doing a special post-mortem on the results of our comprehensive, wide-ranging readership survey. The questionnaire was sent out midway through May and closed a month later, and it garnered some fascinating and eye-opening responses.

One of the less fascinating (and frankly more worrying) answers to our question ‘What are you particularly concerned about in the flooring industry’ was: price increases leading to inflation. This came up repeatedly, and, for me at least, raises a big red flag. Because not only is rising inflation worrying, it’s also a sign that while the rumours of inflation have become louder and more frequent in recent months many contractors are hearing the message and starting to worry.

Inflation averaged 2.49% from 1989 until 2021, reaching an all-time high of 8.50% in April 1991 and a record low of -0.10% in April of 2015. But it’s rearing its ugly head all over again. Why is high inflation such a bad thing? In a nutshell, it pressures government to increase the value of the state pension and unemployment benefits and other welfare payments as the cost of living climbs. In addition, high inflation can lead to an increase in pay claims as people look to protect their real incomes.

While those points may not have direct or immediate resonance with the construction and flooring industry, they certainly play into the wider picture of an economy facing trouble ahead. Indeed, as I write this, the FTSE 100 endured its worst day in almost three months as heightened concern over inflation triggered a sell-off in global equities.

A report in The Times said: ‘Cheap labour and low-cost production have long enabled China to produce cheap exports, deflating prices globally, but the country reported a 6.8% rise in its producer price index for April, above forecasts of 6.5%. This was the fastest rate in three-and-a-half years.’

‘It’s a pretty worrying time for the market,’ one trader in London said. ‘There’ll be a long period of not knowing whether inflation will persist or whether it will be a flash in the pan.’

For most flooring contractors, the main problem is – plain and simple – rising prices of supplies means they have to pay more for the same thing. That’s not good, and it has ramifications for their profits which many can ill afford coming in the aftermath of Brexit and Covid-19.

This is a topic we’re going to keep a close eye on. If suppressing inflation becomes difficult for government, it’s a problem all of us are going to have to face up to eventually. 

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