Equity markets were driven lower this week, as widespread gas shortages and persistent fears of rising inflation caused significant concern amongst investors.
Gas Shortage – The Colonial Pipeline, the largest pipeline system for refined oil products, suffered a ransomware cyberattack and was forced to shut down. With the pipeline largely responsible for carrying fuel to the majority of the Southeast, fuel prices increased, and many people rushed to the pumps, fearing shortages. The pipeline resumed operations on Wednesday, but it may take several days for service to return to normal.
Inflation Concerns – The Consumer Price Index rose 4.2% in April, exceeding analyst estimates of 3.6%. This marks the sharpest increase since September 2008. While this dramatic increase fueled concerns about rising inflation, driving the stock market lower, it is also a result of inflation being very low at this time in 2020, as the COVID pandemic caused a widespread shutdown of the U.S. economy.
Lumber Prices – The price of lumber has continued to skyrocket, with the current price at $1,635 per 1,000 bd ft., 377% higher than at this time last year. This dramatic increase in material costs has significantly decreased the ability of home builders to produce the same volume of housing units. These increased costs and decreased production volume, along with minimal available inventory in the existing housing market, have continued to drive home prices higher.
Source: Visual Capitalist
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