Steel Price Spike Meets Credit Crunch

Record high oil and steel prices revitalized inflation during the first half of the year. Those cost pressures started to impact construction cost indexes in the third quarter, with inflation jumping from 3.1% last June to 6.3% in September. But by the end of this quarter, Wall Street’s financial meltdown was in full swing and economists were downgrading already pessimistic forecasts for 2009. In the short-run, the credit crunch will undermine demand from commercial markets, knocking inflation back. However, the huge costs of federal government bailouts for troubled financial firms is laying the foundation for higher inflation in the not-too-distant future.

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