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Building materials price bump increases inflation jitters

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Cement mixer truck transport with pouring concrete to create for walking.
Travis Perkins warned of a 15% price bump for bagged cement. Photo: Getty

Construction heavyweight Travis Perkins (TPK.L) told customers this week to brace for a 15% rise in the price of bagged cement, a 5% bump in the price of paint and a 10% increase in the price of chipboard. 

According to a report in the Sunday Times, Britain's biggest builder's merchant sounded the alarm on price increases in a number of raw materials, which could lead to more widespread fears of an inflationary spiral.

The newspaper quoted the merchant as saying that “the market is facing considerable cost and availability challenges on a number of key commodity items at the moment."

The news comes following data released in April through the IHS Markit/CIPS construction activity index showing that Britain’s construction sector has had its sharpest pick-up in activity since 2014. 

A snapshot of the sector pointed to an across-the-board increase in March, with house-building, commercial projects and infrastructure work all displaying strong growth. 

Construction accounts for around 6% of total UK output.

Watch: What is inflation and why is it important?

It also comes amid global fears from investors surrounding runaway price increases.

Read more: Why are investors worried about inflation?

Earlier this month fears about inflation sparked a global sell-off in stock markets around the world.

Last week, central bankers in the UK played down the risk it poses. 

The expected acceleration in prices this year will likely be temporary, Bank of England (BoE) governor Andrew Bailey said in testimony to MPs Monday. 

Inflation is a Goldilocks measure — too low, and economies stagnate; too high, and growth slows. It can be steered by the policies of central banks and most aim for a sweet spot of around 2%.

Jon Cunliffe, one of Bailey's deputies, said inflation will later return to the central bank’s 2% target as growth slows.

Read more: Two-thirds of UK shops face looming legal action on rents

While most economists agree, financial markets are betting that the central bank will raise interest rates as early as next year, implying that investors expect the recovery to gain enough momentum to force the BoE’s hand.

Most major economies are currently below that level but it is not expected to stay that way. Commodity prices have already started soaring, which will eventually filter through into prices of goods on shelves. Everyone from car manufacturers to tech companies have also been hit by a shortage of microchips caused by an unexpectedly large surge in demand.

Inflationary pressures are particularly acute right now due to recent rounds of stimulus spending in the trillions in the US, which are meant to drive recovery and growth. The worry is it may not actually help things much and instead simply drive up prices — a measure analysts have called a "perfect storm."

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