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Julian Haslam-Jones, Regional Director and UAE Country Manager
THE RISING THREAT OF INFLATION Julian Haslam-Jones, Regional Director and UAE Country Manager at Driver Trett, a Global Construction Consultancy company, gives us the run down on the rising threat of inflation and the effects on the construction industry
I
t has been well documented in the past months that the extraordinary stimulus measures to assist the global economy in recovering from the pandemic are fuelling price rises in many economies. Inflation refers to a rise in the average level of prices sustained over time, which also corresponds to a fall in the internal (domestic) purchas-
ing power of money. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The historic trend in advanced economies is that inflation has been declining as shown in the below graph.
CURRENT GLOBAL MARKET As the Financial Times has recently reported the December meeting of the Federal Reserve’s most important economic committee was routine. Policymakers agreed that the economy could cope with rising levels of spending “without
The 30 year demise of inflation across advanced economies Annual % change in conusmer prices Inflation in OECD economies
Decade averages 14 12 10 8 6 4 2
1971
1980
1990
22 | CONSTRUCTION BUSINESS NEWS ME | JULY 2021
2000
2010
2020
any strong general upward pressure on prices”. Although prices of a few raw materials were rising sharply, “finished goods have not been subject to pervasive upward cost pressures”. Generalised inflation, the committee concluded, was not a serious concern. However, it is over-stimulation of the world economies which is changing this view. Karen Ward, chief European market strategist at JPMorgan Asset Management stated recently “We’ve always assumed that the structural supply side enhancements such as technology and globalisation are so great that we could never overwhelm them with demand, but it still must be the case that you can overwhelm supply with demand and ultimately generate inflation”. Alongside a recovery of energy prices to pre-Covid levels, there has been a shortage of products such as wood WWW.CBNME.COM
