Eye on the Economy Inflation Pressure to Continue in

INFLATION PRESSURE

to Continue in 2022

In November, consumer prices were up 6.8% from a year ago — the largest year-over-year gain in almost 40 years, with further inflation expected. Supply-chain constraints and strong consumer demand have contributed to recent price increases in some sectors. For example, building material pricing in the separate Producer Price Index increased 14.1% on a year-to-date basis through November. This is triple the comparable growth rate from last year. Prices are higher for a broad set of materials, including lumber, which is now back above $900 per thousand board feet. Tariffs on Canadian softwood lumber are set to double to 18%, which is inexplicable given the need to reduce inflation pressure on consumer prices, including residential rents.

A tighter labor market also warns of wage-based inflation pressure. For example, there are currently 410,000 open positions in the construction industry. NAHB expects this number to rise as the overall unemployment rate declines and the construction industry expands. Indeed, the skilled labor shortage will likely emerge as the top industry challenge as some supply-chain issues ease.

Combating rising prices is now the priority for the Federal Reserve, whose leadership have retired the term “transitory” with respect to inflation expectations. At its December meeting, the central bank announced it will double its pace of tapering asset-backed purchases (including mortgage-backed securities). Projections indicate the possibility of three federal funds rate hikes in 2022 and perhaps three more in 2023. This pivot toward a tighter monetary policy is consistent with the NAHB interest rate forecast, which sees a 3.6% average 30year mortgage interest rate in late 2022.

Despite ongoing macro challenges, including policymakers’ potential actions in response to the omicron variant, home builders are confident. The NAHB/Wells Fargo Housing Market Index increased one point to a level of 84, the highest reading since February. And home construction posted gains in November: Single-family starts increased 11.3% to an annual rate of 1.17 million, which is up 15.2% year to date. And multifamily production increased 12.9% to an annualized 506,000 pace, as rents rise and vacancy rents decline.

BY: ROBERT DIETZ

GET UP TO $5,400

TO GET THE JOB DONE

Shown with equipment from independent suppliers which is not covered by the GM New Vehicle Limited Warranty. GM is not responsible for the safety or quality of independent supplier alterations.

USING THE PRIVATE OFFERS1 FOR NAHB MEMBERS IS EASY:

1. Get your NAHB proof of membership. 2. Visit your local Chevrolet, Buick or GMC dealer and mention this Private Offer. 3. Select an eligible vehicle(s) to purchase or lease and present your NAHB proof of membership.

For even more value, combine this offer with the National Fleet Purchase Program and Business Choice Offers. For full details on the Private Offer, NAHB members should visit nahb.org/gm.

Example offer for NAHB members who are business owners purchasing a 2021 Chevrolet Silverado 2500 HD Crew Cab 1LT 4WD.

Up to

$1,000

Private Offer 1

+ $3,400

National Fleet Purchase Program (FVX)2

Up to

+ $1,000 =

Eligible Accessory Cash Allowance3, 4

Up to

$5,400

In Potential Value

1Private offer amount varies by model; up to $500 offer for retail delivery and up to $1,000 offer for fleet deliveries. Valid toward the purchase or lease of eligible new 2020, 2021 and 2022 model year vehicles. Customer must take delivery by 1/3/2022. Not compatible with some other offers. Not valid on prior purchases. Excludes all Cadillac vehicles; 2020 Buick Cascada, LaCrosse, Regal and Verano; Chevrolet Colorado 2SA, Sonic, Trax, Volt and GMC Canyon 2SA; 2020-2021 Encore 1SV; Chevrolet Blazer, Camaro, Corvette, Equinox 1SM, Malibu 1VL, Traverse 1L0; GMC Acadia 1SV and Terrain 2SA. Additional GM models may be excluded at GM’s sole discretion. See dealer for details. 2Offer available to qualified fleet customers through 1/3/2022. Not compatible with some other offers. Take delivery 1/3/2022. See dealer for details. 3To qualify, vehicle must be used in the day-to-day operations of your business and not solely for personal/ non-business-related transportation purposes. Must provide proof of business ownership. For complete program requirements, including information regarding offers, vehicles, equipment, options, warranties and ordering, consult your dealer or visit gmbusinesschoice.com. 4Eligible purchases must be equal to or greater than the amount of the cash allowance. Accessory Cash Allowance requires purchase of the eligible accessories from your dealer.

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