Stronger Economy May Increase Supply Costs

A global economic rebound is raising demand for materials like steel and aluminum.

The Federal Reserve said last month that companies in several parts of the country “noted increases in manufacturing, construction, or transportation input costs.” Most areas reported modest to moderate growth in prices.

The Institute for Supply Management’s manufacturing index in January reported its price index surged to the highest level since May 2011, as 47 percent of respondents reported paying higher raw-materials prices.

The Labor Department’s producer-price index, a measure of inflation experienced by businesses, increased 2.6 percent last year. In 2017, prices of steel-mill products rose 7.8 percent, while industrial chemicals rose 11.7 percent, the DOL said.

Aluminum products maker Arconic Inc. expects some relief from last year’s 30-percent surge in aluminum prices. “There’ll be some raw-material costs, but not of the magnitude that we had in 2017,” CFO Ken Giacobbe told analysts.

Source: Wall Street Journal