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Yet, even with so little pricing power, lumber witnessed extraordinary price increases. Why would we expect anything different in other product categories? If

Yet, even with so little pricing power, lumber witnessed extraordinary price increases. Why would we expect anything different in other product categories? If anything, most products witnessed less price inflation than lumber. My point is that lumber makes for an excellent case-study in demand driven inflation. Everyone wants to point to supply shortages and cartelization -- and greedy corporations -- when given what we saw in commodity pricing, there's plenty of reason to conclude the rest of the market was adjusting rationally in the face of increased demand and money supply, and without collusion or monopoly influence.

cudgy 4y ago
Lack of pricing power does not mean that the fundamental forces driving prices cannot have an impact like increased prices. It means that the industry/company/supplier cannot solely or significantly control the price. Lumber initially shot up if I recall due to a supply issue when covid caused mills to shut down with limited labor supply and even outright restrictions to operation by local governments. It subsequently whipsawed to much lower prices once mills came back online as evidenced by the volatile lumber spot prices shown here: https://markets.businessinsider.com/commodities/lumber-price https://markets.businessinsider.com/commodities/lumber-price As for corporate profits and their impact on recent inflation, see the following article which states: “Since the trough of the COVID-19 recession in the second quarter of 2020, overall prices in the NFC sector have risen at an annualized rate of 6.1%—a pronounced acceleration over the 1.8% price growth that characterized the pre-pandemic business cycle of 2007–2019. Strikingly, over half of this increase (53.9%) can be attributed to fatter profit margins, with labor costs contributing less than 8% of this increase. This is not normal. From 1979 to 2019, profits only contributed about 11% to price growth and labor costs over 60% …” https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-...

cudgy 4y ago

Lack of pricing power does not mean that the fundamental forces driving prices cannot have an impact like increased prices. It means that the industry/company/supplier cannot solely or significantly control the price. Lumber initially shot up if I recall due to a supply issue when covid caused mills to shut down with limited labor supply and even outright restrictions to operation by local governments. It subsequently whipsawed to much lower prices once mills came back online as evidenced by the volatile lumber spot prices shown here: https://markets.businessinsider.com/commodities/lumber-price https://markets.businessinsider.com/commodities/lumber-price As for corporate profits and their impact on recent inflation, see the following article which states: “Since the trough of the COVID-19 recession in the second quarter of 2020, overall prices in the NFC sector have risen at an annualized rate of 6.1%—a pronounced acceleration over the 1.8% price growth that characterized the pre-pandemic business cycle of 2007–2019. Strikingly, over half of this increase (53.9%) can be attributed to fatter profit margins, with labor costs contributing less than 8% of this increase. This is not normal. From 1979 to 2019, profits only contributed about 11% to price growth and labor costs over 60% …” https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-...