U.S. manufacturers have been struggling with supply chain issues and material shortages, but now, they’re reporting the biggest price jump in 42 years. But it’s not just their problem. Those issues have a trickle-down effect on the economy. Experts say all of this is keeping pressure on inflation metrics and the Fed, whose job it is to keep prices stable. In other news, one expert has expressed that the fundamentals are in place to push gold to $3,000 and silver to $150 an ounce in the future. However, he said the climb won’t happen overnight.
CNN Business/Anneken Tappe
US manufacturers haven’t seen prices jump like this since 1979
America’s factories are struggling with supply chain issues and material shortages. Now, that’s showing up in prices: in June, Manufacturers reported the biggest price jump in 42 years.
The Institute for Supply Management’s manufacturing price index rose to 92.1% last month, up 4.1 percentage points and hitting its highest mark since July 1979. It was the 13th straight month of price increases in the sector.
“Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices, and difficulties in transporting products are continuing to affect all segments of the manufacturing economy,” said Timothy Fiore, chair of the ISM’s manufacturing business survey committee.
Demand continues to be strong, as manufacturers are having a hard time keeping up and prices keep rising. “Virtually all basic and intermediate manufacturing materials are experiencing price increases as a result of product scarcity,” Fiore said.
The only commodity that didn’t get more expensive last month was acetone, which is most commonly used as a solvent to manufacture plastics and other industrial products.
Overall, activity in the manufacturing sector, as measured by the purchasing managers index, waned in June. That index fell to 60.6%, down 0.6 percentage points and slightly below what economists had expected. Such a marginal slowdown is no surprise given the headwinds producers are facing, analysts at Action Economics said in a note.
At some point, supply constraints will begin to affect activity, and while the high demand is a good thing for the recovery, the industry is in a tricky spot.
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Kitco News/David Lin
Should silver really be $150 and gold $3k? Are current prices an ‘insult’? Lobo Tiggre gets real
Sentiment for gold and silver are weak, right now, said Lobo Tiggre of the Independent Speculator, Kitco News reports.
Tiggre told David Lin, anchor for Kitco News, that he never wants to be a “mindless cheerleader” in the precious metals space, but with that said, fundamentals are in place to push gold to $3,000 and silver to $150 an ounce in the future, although this climb won’t happen overnight.
“This negative sentiment, this bearishness that’ pervaded our space, is a fantastic opportunity and I’ve been putting my money in that now,” he said.
Corrections are natural parts of the price cycle, Tiggre added.
“I think all the reasons for gold and silver to go higher are fully enforced. I think that a lot of it was priced in advance. I think the crisis in 2020 pulls forward a lot of that [price action] so it is natural for there to be a period of correction and consolidation now. I don’t see anything wrong with these markets at all, and if people are frustrated, my advice for them is to go to the Kitco website, go to the gold price chart…look at the long-term numbers, and understand that the problems are short-term,” he said.
Tiggre noted that the price of metals is whatever the markets determine they should be, and if the market is currently trading at $1,778 an ounce for gold and $26 for silver, then investors need to accept the reality that the market is currently in a lull and not get “insulted.”
Yahoo Finance/Adam Shapiro
Biden proposal is ‘a pretty cruel tax hike’: Kevin Brady
President Biden’s proposal to raise taxes on the wealthy could hit middle-class Americans. “I think it’s a pretty cruel tax hike,” U.S. Representative Kevin Brady (R-Tex.) told Yahoo Finance Live.
“While it’s billed as hitting the wealthy,” Brady said, the changes would raise taxes on “family-owned farms and businesses, Americans who have created a nest egg, usually in property for them or for the next generation.”
Biden’s American Families Plan proposes to eliminate what is known as the “step-up in basis” on assets that people, when they die, leave to relatives. “The current tax law states that when a person dies, basis is stepped up at death, to the fair market value as of the date of death,” according to Bankrate.com
In other words, a parent buys a house for $1 million dollars. After several years, they die and leave the house, now worth $5 million, to their kids. That $4 million gain is not subject to tax because the heirs use the “step-up in basis” to exempt the gain from the capital gains tax.
The Biden administration issued a summary of the plan which says it wants to,”close this loophole, ending the practice of “stepping-up” the basis for gains in excess of $1 million ($2.5 million per couple when combined with existing real estate exemptions) and making sure the gains are taxed if the property is not donated to charity.”
Keep reading, here.