The Small Data Item With Large Consequences For Chemicals And Beyond

  • In the heaps of Producer Price Data issued by BLS, there was one curious item in September – an unusual price shift.
  • Corroborated by the industry sources, the shift can become a catalyst for many changes beyond petrochemicals.
  • Most of the supply chain will suffer, but there are few companies that might benefit.

Looking for change catalysts can sometimes be frustratingly difficult, particularly in the age of data abundance. In the supply chain investment process, I typically follow commodity price shifts, revenue surprises by major companies, corporate actions – most of these events create aftershocks in the supply chains that can be reliably translated into investment theses.
One such area to pay attention to is Producer Price Indices published by the Bureau of Labor Statistics. Although the purpose of data series is to follow inflation, deep industry level monthly pricing data are an excellent source of change catalysts.
The challenge is of course sifting through the hundreds of industries and finding ones with significant price change; luckily this can be automated – I use LINKS Mira for the purpose. September PPI data show a surprise price increase of 8.1% in the petrochemicals industry. Such a significant price increase cannot leave other industries in the supply chain unaffected. One of the industries that I follow – organic chemical manufacturing, for instance, shows an expected 9.8% profit loss due to the price change.
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