Prices of lumber and other raw materials are slumping, and that puts the economy at risk of a double-dip recession, experts say. Until recently, many economists were concerned about an outbreak of inflation. But in the wake of Europe’s debt crisis, many are now worried about deflation.
Prices for framing lumber have dropped 21 percent just in the last five weeks, according to the National Association of Home Builders, CNNMoney.com reports.
Other industrial material prices are slipping in synch.
That doesn’t bode well for the global economy, says Lakshman Achuthan, managing director of ECRI (the Economic Cycle Research Institute).
"The way to read this is that a slowing of global industrial activity is starting right now," he told CNNMoney.com.
"We don't want to jump the gun. We're not yet able to say the slowing is going to continue so much that we're going to get a decline in actual activity. We might, but we're not there yet."
If prices continue to slide, manufacturers will have to trim production or fold, because they won’t be able to make profits from their sales, Eric Schooler, CEO of The Collins Cos., a lumber producer, told CNNMoney.com.
Some experts are focusing on weak industrial metals prices.
Copper’s recent decline to a seven-month low is "a sign that the global economy is poised to cool off, and probably quite sharply," David Rosenberg, chief economist at Gluskin Sheff + Associates, told the Chicago Tribune.
