TRG | The Bottom Line – 1/15

As TRG wrote in our 2021 Investing Themes thought piece (published 12/7/20), we expected inflation to be a distinct 2021 theme. In conjunction with the entire value chain being strained on tight capacity and high demand, we believed 2021 will have more inflationary pressures across raw materials, labor, freight/logistics, and insurance to name a few. Early into calendar 2021, we are hearing loud and clearly from a wide array of industry contacts across the construction and industrial value chain that inflation has picked up momentum. Given a strong demand outlook, we believe that pricing actions from a wide array of building products and materials categories will be largely successful. This period should benefit distributors to a greater degree, a business model that typically thrives in inflationary periods. While manufacturers should gain pricing, general early feedback from a wide variety of sources indicate that early 2021 increases may not be enough to offset overall cost increases.