Buckle up, we are headed into some serious inflation as one industry professional said, “Things are now out of control. Everything is a mess, and we are seeing wide-scale shortages.”

March 1 (King World News) – Peter Boockvar:  The February ISM manufacturing index rose to 60.8 from 58.7 which was two points more than anticipated and compares with 60.5 in December. As inventories remain lean at around 50 and customer inventories at just 32.5, New Orders rose 3.7 pts to 64.8 and Backlogs grew by 4.3 pts to 64. … Stress remains on the supply chain as Supplier Deliveries rose by 3.8 pts to 72, the 2nd highest print since 1979.

Supplier Deliveries 2nd Highest Since 1979!

This helped drive Prices Paid up by another 3.9 pts to 86, the most since July 2008 just as crude oil was peaking at $140 a barrel.

Prices Paid Highest Since 2008…When Crude Oil Was $140

The breadth of the growth remained the same with 16 of 18 industries surveyed seeing growth. ISM said:

“Manufacturing performed well for the 9th straight month, with demand, consumption and inputs registering strong growth compared to January. Labor market difficulties at panelists’ companies and their suppliers continued to restrict manufacturing economy expansion and will remain the primary headwind to production growth until employment levels and factory operations can return to normal across the entire supply chain.”

Normal is the magic word as did something permanent happen with Covid and the disrupted supply chains or not…

To hear Sean Boyd discuss $3,000 gold and the big game-changer
for the gold market 

Throw another $1.9 Trillion of government spending on top of that. Inflation breakevens are rebounding with the 5 yr level up 3.3 bps after Friday’s 6.4 bps rise. At 2.46%, that is the highest since April 2011 and is just a few bps from the highest since July 2008, which you know when, oil was…

These supply problems and cost pressures dominated the commentary from companies asked:

Prices are rising so rapidly that many are wondering if [the situation] is sustainable. Shortages have the industry concerned for supply going forward, at least deep into the second quarter.” (Wood Products)

“The coronavirus [COVID-19] pandemic is affecting us in terms of getting material to build from local and our overseas third- and fourth-tier suppliers. Suppliers are complaining of [a lack of] available resources [people] for manufacturing, creating major delivery issues.” (Computer & Electronic Products)

“Supply chains are depleted; inventories up and down the supply chain are empty. Lead times increasing, prices increasing, [and] demand increasing. Deep freeze in the Gulf Coast expected to extend duration of shortages.” (Chemical Products)

Steel prices have increased significantly in recent months, driving costs up from our suppliers and on proposals for new work that we are bidding. In addition, the tariffs and anti-dumping fees/penalties incurred by international mills/suppliers are being passed on to us.” (Transportation Equipment)

“We have experienced a higher rate of delinquent shipments from our ingredient suppliers in the last month. We are still struggling keeping our production lines fully manned. We anticipate a fast and large order surge in the food-service sector as restaurants open back up.” (Food, Beverage & Tobacco Products)

“Overall capacities are full across our industry. Logistics times are at record times. Continuing to fight through shipping and increased lead times on both raw materials and finished goods due to the pandemic.” (Fabricated Metal Products)

Prices are going up, and lead times are growing longer by the day. While business and backlog remain strong, the supply chain is going to be stretched very [thin] to keep up.” (Machinery)

Out Of Control, Wide-Scale Shortages
Things are now out of control. Everything is a mess, and we are seeing wide-scale shortages.”
(Electrical Equipment, Appliances & Components)

Labor shortages at suppliers are affecting material deliveries and prices.” (Plastics & Rubber Products)

“We have seen our new-order log increase by 40 percent over the last two months. We are overloaded with orders and do not have the personnel to get product out the door on schedule.” (Primary Metals)

Here were the pricing comments within the Markit measure of US manufacturing:

goods producers registered a severe uptick in cost burdens. The rate of input price inflation accelerated to the sharpest since April 2011. Higher raw material prices, notably for steel, and increased transportation costs were widely linked to the rise. The recent strengthening of demand allowed firms to partially pass on higher costs to clients through the fastest rise in charges since July 2008.”

Again, when oil was peaking at $140 a barrel.

Extremely Bullish For Gold & Silver
King World News note: As inflation ramps even higher, this will be extremely bullish for the gold and silver markets. As Greyerz wrote, we are at or near the end of this correction in gold with a very small possibility the price of gold may briefly dip below $1,700. For those of you who are buying physical gold and silver, continue to buy the weakness because we are close enough to the bottom at this point and you may lose the opportunity for cheap prices if you try to get too cute.

To listen to a powerful and timely interview with E.B. Tucker about the fierce trading action in the gold and silver markets CLICK HERE OR ON THE IMAGE BELOW.

Alasdair Macleod discusses why the gold and silver markets are very close to a major bottom CLICK HERE OR ON THE IMAGE BELOW TO LISTEN.

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