Foggy path ahead for aggregate demand

Passport please.

We are moving toward an increased use of COVID vaccine passports. Will this speed up the economy, slow it down or make no difference? One conclusion is that it will make almost no difference, but it will make many people feel safer and a few threatened.

The real story going forward, however, is Sen. Joe Manchin (D-West Virginia). The new Senate kingmaker will determine if we have two new legislative laws by year’s end – or a mess.

Infrastructure is the hostage in this political play, and it still seems as though extra funds for infrastructure will be signed into law. Infrastructure is just too popular to die.

As COVID hangs around, the economy will slow as rules tighten and loosen on a monthly basis. Supply chain bottlenecks will continue like whack-a-mole, changing from one industry to the next.

The rapid rise in inflation is headed for a dramatic showdown next year. It reminds me of aircraft taking off from an aircraft carrier: You better have enough speed by the end of the deck, or you will dive into the ocean quickly.

Here is why this analogy works: the Federal Reserve says inflation is temporary. If the Fed is wrong and interest rates are kept near zero for too long, inflation builds. And this means the Fed needs to raise interest rates even more because it delayed. 

Still, the Fed cannot raise interest rates too high because they will sink the economy, which has run out of runway.

What we are left with is no clear path forward on aggregate demand growth for now. Come back in two months, when it will be clearer for a higher probability path.

Aggregate pricing strength, at least, is present in most areas and will be even better in 2022.

Billions of metric tons	2016	2017	2018	2019	2020est	2021est	2022est
Residential	0.57	0.57	0.57	0.56	0.58	0.71	0.68
Nonresidential	0.72	0.70	0.71	0.78	0.69	0.63	0.65
Nonbuilding	1.03	1.00	1.08	1.16	1.18	1.21	1.28
Total	2.32	2.27	2.36	2.50	2.45	2.55	2.61
Yr./Yr. %Ch.	+2.7%	-2.2%	+4.0%	+5.9%	-2.0%	+4.1%	+2.4%

Note: There is a small difference between our estimates of consumption and the USGS because of our own estimates in states where USGS does not report values due to competitive concerns

David Chereb, Ph.D., is with David Chereb Group (DCG), which produces customized market forecasts by major segment of construction, from the county level up. Clients use DCG market intelligence reports for business planning and acquisition analyses in aggregate, ready-mixed concrete and cement. Visit davidcherebgroup.com for more information.