Such cost pressures could spill over into broader consumer price inflation, particularly if the construction sector reaches capacity constraints (employment in the sector is currently 9 percent below its 2006 peak). Household debt is rising again and households are forecast to spend more than they earn in 2014.
Weakness also continues in sectors that produce non-energy commodities. But we must keep a sense of perspective. There is still considerable strength in other important areas of our economy. The latest data show that investments in the energy sector are very strong. And, except for autos, retail sales are solid. In addition, activity in housing, non-residential construction, and most other service industries remains firm.