The Producer Price Index, Chicago PMI, and Baker Hughes Crude Oil Riggs
By: Jackson Canada, Aidan Gennaro, and Graham Stadtler
The Producer price index is a tool used by economists that measures the average change within a given time period of prices received by domestic producers for their goods and services. The PPI is measured monthly by the Bureau of Labor Statistics with the most recent calculations released on September 14, and the remainder for the duration of the semester being Oct. 11, Nov. 15, and Dec. 13. The PPI is calculated similarly to the CPI by dividing the average weighted prices of goods and services produced in the current month by the average weighted prices of a base month and year and multiplying the value by 100. The calculations for August 2023 report that the PPI for final demand advanced a seasonally adjusted 0.7% and 1.6% on a year-over-year basis. This monthly rise in prices is the largest since June 2022 and can largely be attributed to the 10.5% increase in energy prices. For reference, gasoline prices skyrocketed by 20.0%. The index excluding energy, foods and trade services rose .3% in the month of August and 3.0% for the 12 months ended in August; the largest increase since the 12 months ended in April (3.4%). On the other hand, prices for fresh produce fell 11.5% with the indexes for residential electric power and industrial chemicals also decreasing. The mixed signals with the PPI and its other indexes leave the future uncertain, with the Fed deciding to leave interest rates unchanged at 5.25%-5.50% for the month of September. Powell said in his statement regarding the soft landing of inflation on Wednesday, “We want to see convincing evidence really that we have reached the appropriate level, and we’re seeing progress and we welcome that. But, you know, we need to see more progress before we’ll be willing to reach that conclusion”. The future for the economy remains cloudy with the Fed still targeting a soft landing from inflation as its main priority. The remainder of the FED’s decisions for the fourth quarter are going to be game-time decisions, and the future of inflation remains uncertain although things seem to be getting better.
Baker Hughes has issued rotary rig counts since 1944.The Baker Hughes Crude Oil Rigs refers to a widely used oilfield service company that keeps track of how many off-shore and land based oil sites there are which allows for a better understanding of the oil in a given area or globally. This means that they essentially keep count of how many drilling sites there are world wide for oil that are in use. They do so by doing a weekly rig count that first started in 1975. This means the active rigs are counted every single week and new numbers are released. New numbers are released Friday the 22nd of September and the last numbers released are from September 15th. Since 2014, almost 10 years ago, there has been a decline in crude oil rigs worldwide. From over 1600 in 2014 to around 600 here in the year 2023. As of 9/15/23 there were 641 total rigs and I forecast that it will not be anymore than 10 higher or lower than 641 total based on the past couple sets of numbers when new numbers are released on Friday, September 22nd. This is also predicted on their website Rig Count.
The Chicago PMI (ISM-Chicago Business Barometer) measures the performance of the manufacturing and non-manufacturing sector in the Chicago region. The Chicago PMI is based on a monthly survey of purchasing managers and executives from a variety of industries in the Chicago region. These professionals are questioned about different aspects of their business, such as new orders, production, employment, supplier deliveries, and inventories. The responses are used to calculate a single condensed index number. The release dates for each variable is due at the last business day of each month. This most recent month has been above the historical average with the most recent being at 48.70 whilst the previous is more near the average range being at 42.80. Its overall highest was at 81.00 and its lowest at 20.70. I suspect it will decrease because in the past when it has reached a high of this height it has gone back down to the 40-42 range.
Source Links:
https://tradingeconomics.com/united-states/crude-oil-rigs (Baker Hughes)
https://rigcount.bakerhughes.com/#:~:text=Baker%20Hughes%20has%20issued%20the,international%20rig%20count%20in%201975. (Baker Hughes)
https://www.bls.gov/ppi/ (PPI)
https://tradingeconomics.com/united-states/chicago-pmi (Chicago PMI)
Baker Hughes' role in monitoring oil rig counts worldwide offers great insights into the global oil industry. Since 2014, crude oil rigs have declined significantly, perhaps signaling a shift in the oil market and energy landscape.
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