Restore sales of bars and restaurants I don’t know why this is not getting more attention and I find it hard to believe, given that there are still pockets of the economy that haven’t fully reopened, but according to the Bureau of Statistics, sales are up by food services and drinking places (ie bars and restaurants) to a slightly higher level than it was before the pandemic. This is an amazing achievement. Chart 1 shows the catastrophic decline in the sector’s activity level in the spring of 2020 when the arrival of the coronavirus confined gourmets and well-drilling patrons to their homes. The outcome of youth employment has been particularly severe. Now, finally, their prospects are looking brighter again. But now, too, debate rages on whether they are getting paid enough. Resistance to raising the minimum wage will lead to a new and unprecedented problem, the difficulty of finding enough willing workers to fill vacancies in the hospitality sector (and many other sectors). Chart 1: US sales by food and beverage service venues Latest data point for May 2021, adjusted for seasonal change, holidays and trading day differences, but not for price changes. Data source: US Census Bureau (Department of Commerce) Graph: ConstructConnect. The costing structure that leads to injuries Chart 2 illustrates, in a stark way, the dilemma facing contractors. The PPI data series computed and published by the Bureau of Labor Statistics includes two metrics specifically designed to capture what is happening with building materials, i.e. the materials “input” index and the materials “special aggregation” index. Both have been increasing rapidly over the past six months. On an annual basis, the material “aggregation” index is + 30.0%; Material Input Index, +24.0%. However, the construction PPI’s “ultimate demand” indicator, which is essentially a “price supply” indicator, is only +2.8% on an annual basis. As the number of construction projects in the pipeline continues to lag behind in historical availability, contractors are forced to keep “ask prices” low, which means they have to absorb extraordinary cost increases internally. If this situation continues, it will inevitably lead to some rather severe losses. Graph 2: US construction quotation prices versus material input costs Data source: Producer Price Index Series (BLS) Graph: ConstructConnect. Bonus Scheme – Building Material Suppliers Retail I add an additional or bonus scheme. Chart 3 records annual sales by building materials supplies. The increases in the cost of building materials indicated earlier, especially for timber and other forest products such as plywood, play a role in increasing “current” (that is, unadjusted for inflation) dollar sales of building materials suppliers. Likewise, the annual increase in sales +33.1% or a third in April 2021 was double any previous best result since 2000. Moreover, it has become common for me recently to explain these large jumps in part by saying that they’re due to the effect of a “low base” However, the “low denominator” argument does not apply in this case. At no time in 2020, as COVID-19 sliced the economy, building materials sales and supplier dealers fell year after year. US Building Materials and Fittings Data source: Census Bureau Graph: ConstructConnect.