Economist Beaulieu Discusses Inflation, Demand, Business Cycle

Here’s what he had to say:

Inflation, demand and prices are on the minds of business leaders in many industries and especially in the steel industry, given its primacy to many industries.

Inflation

Inflation is a major concern, and many people understandably wonder if this is the beginning of a larger inflationary trend that will mimic the late 1970s/early 1980s. The answer is “no.” Then the question shifts to whether we have initiated a systemic inflationary trend that will ignite interest rates. The answer is “not yet.”

Steel prices are a function of supply and demand, with most of each coming from forces in the private sector. There are indications of a lessening in the demand pull later this year and that supply issues will improve. This will naturally lead to a noticeable reduction in pricing pressures. We will be discussing the reasons for these changes, and the expected impact on prices, at the August SMU Steel Summit Conference.

Demand

Demand for houses, automobiles and a host of other consumer and business durables is booming. The appetite seems insatiable, yet that is never the case. It is always a case of when demand will ease (normalize), not if there will be a shift in demand. There are early leading indicators of a shift in the demand curve, including changes going on in China. Expect the change to occur gradually, but you should be experiencing fewer demand-pull pressures later this year and as we move through the early stages of 2022. The reasons and the implications for your business and prices will be presented at the SMU Steel Summit Conference.  

Business Cycle

Most firms are in Phase B of the business cycle. Business is accelerating, and there are internal and external pressures to contend with. Cash and inventory levels must be balanced while looking for that elusive next hire. The hiring situation should improve later this year, which will help with some of the internal pressures. The larger concern is overestimating the inventory and production requirements for 2022. It is best to think in terms of a more normalized rate of growth in 2022.

More information on ITR Economics and on our forecasts and accuracy can be found at itreconomics.com.

You can see Dr. Beaulieu at the 2021 SMU Steel Summit Conference, which will be held live and in-person in Atlanta on Aug. 23-25. You can learn more about the conference and how to register by clicking here or going to the Steel Summit homepage: https://www.events.crugroup.com/smusteelsummit/home