OPEC, Trade Deficits, and the Service Economy

Week in Review: September 5-9

This week highlights the fact that humans represent our greatest challenge, starting with the most excellent and charitable folks at OPEC.

Monday

OPEC Meeting

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) met on Monday and decided to every-so-slightly trim production in October back to August levels (OPEC’s press release). This amounts to a decrease of about 100,000 barrels per day or 0.1% of total global demand.

This is a pretty miniscule cut, and while Brent crude prices bounced above $95 on Monday, they then proceeded to fall down below $88 on news of a potential Iranian nuclear deal, which would bring Iranian crude back to the market. The U.S. now indicates that there won’t be an Iranian nuclear deal in the foreseeable future, but as of Thursday morning, oil prices are still below $90/barrel.

Labor Day

It was the nation’s 128th Labor Day, and we celebrated with a post on how workers have fared during the pandemic: Did Labor Win the Pandemic?

Tuesday

ISM Services Purchasing Managers’ Index

This index from the Institute for Supply Management (ISM) indicates that the U.S. services sector expanded in August at a faster rate than in July and for the 27th consecutive month. This one was chalk full of good news. Sure, prices continued to increase, but at a slower rate than in July, and production, new orders, and exports are all expanding at a faster pace than in July.

S&P Global US Services PMI™

This is another index of the U.S. service sector, but unlike the positively cheery ISM measure, this one showed that business activity contracted “at sharpest pace since May 2020 amid solid fall in new orders” in August. What gives? The S&P measure includes a narrower (but still broad) group of service industries, while ISM includes everything other than manufacturing, including public administration.

What should you take from these diverging measures of the “service” economy? First, I wouldn’t let them influence your feelings on the economy too much. Second, it seems like the broader economy is expanding (as measured by ISM), but there might be some weakness in specific service segments (S&P).

Wednesday

Goods and Services Trade Balance