Friday 9 September 2022. – Inflation means that things get more expensive, right? And high inflation means that things get quickly more expensive?
The consumer price inflation in the USA and in the Eurozone has exceeded 8% in recent months (year-on-year). That is high compared to what we’ve been used to. According to the World Bank, the U.S. inflation rate in the 2010s varied between 0.12% (2015) and 3.16% (2011).
It’s clear that we need to pay more for electricity and coffee. But is plywood getting more expensive? How about sawn timber?
To restrain inflation and economic overheating, central banks increase interest rates. On Thursday, European Central Bank raised its key interest rate by 0.75%. That was its first increase in 11 years.
How do the higher interest rates work in industries where prices were already declining? Is it simply speeding the spiral downwards by killing the demand? Should someone tell central banks that the wood product market has already overheated a couple of times, and now the market is overcooling?
Different business areas are in different stages of the economic cycle. Wood products are marching early in the cycle, and indicating the direction for other verticals. The monetary system looks after the overall economy and tries to balance soaring prices and sufficient demand. One size does not fit all, but we still wear the same hat.