{"id":55038,"date":"2025-10-24T10:09:44","date_gmt":"2025-10-24T14:09:44","guid":{"rendered":"https:\/\/stockmarketwatch.com\/stock-market-news\/u-s-economic-activity-surges-as-inflation-cools-while-energy-sector-anticipates-reduced-spending-into-2026\/55038\/"},"modified":"2025-10-24T10:09:44","modified_gmt":"2025-10-24T14:09:44","slug":"u-s-economic-activity-surges-as-inflation-cools-while-energy-sector-anticipates-reduced-spending-into-2026","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/u-s-economic-activity-surges-as-inflation-cools-while-energy-sector-anticipates-reduced-spending-into-2026\/55038\/","title":{"rendered":"U.S. Economic Activity Surges as Inflation Cools, While Energy Sector Anticipates Reduced Spending into 2026"},"content":{"rendered":"<h2>Key Takeaways<\/h2>\n<ul>\n<li><strong>U.S. business activity<\/strong> saw a significant acceleration in October, with the <strong>S&amp;P Global Composite PMI<\/strong> rising to <strong>54.8<\/strong>, exceeding expectations and reaching a three-month high.<\/li>\n<li><strong>September U.S. inflation<\/strong> came in softer than anticipated, with the headline Consumer Price Index (CPI) rising <strong>0.3% month-on-month<\/strong> and <strong>3.0% year-on-year<\/strong>, potentially paving the way for further Federal Reserve rate cuts.<\/li>\n<li><strong>Baker Hughes (<a href=\"\/stock\/BKR\">BKR<\/a>)<\/strong> anticipates a challenging 2026 with <em>low activity and reduced spending<\/em> in the upstream oil and gas sector, following a projected <em>high-single digit drop in worldwide upstream spending for 2025<\/em>.<\/li>\n<li>The <strong>International Energy Agency (IEA)<\/strong> forecasts a substantial global oil surplus of as much as <strong>4 million barrels per day (bpd)<\/strong> in 2026, contributing to the bearish outlook for crude oil futures.<\/li>\n<\/ul>\n<h2>U.S. Economic Indicators Point to Robust Growth and Cooling Inflation<\/h2>\n<p>The U.S. economy demonstrated surprising strength in October, with <strong>S&amp;P Global&#39;s flash Purchasing Managers&#39; Index (PMI)<\/strong> data indicating an acceleration in business activity. The <strong>Composite PMI Output Index<\/strong> rose to <strong>54.8<\/strong> in October from 53.9 in September, marking a three-month high and signaling growth above the third-quarter average. This expansion has been continuous for 33 consecutive months.<\/p>\n<p>The services sector was a primary driver of this growth, with the <strong>Services PMI<\/strong> climbing to <strong>55.2<\/strong> in October, up from 54.2 in the previous month and significantly surpassing market expectations of 53.5. This represents the second-sharpest pace of growth in the sector this year, with new orders rising at their fastest rate in 2025. Manufacturing also showed improvement, as the <strong>Manufacturing PMI<\/strong> edged up to <strong>52.2<\/strong> in October from 52.0 in September, slightly exceeding the 51.9 estimate. This marks the ninth improvement in factory conditions in ten months, supported by accelerating production.<\/p>\n<p>Concurrently, U.S. inflation data for September provided a &quot;sigh of relief&quot; for policymakers and investors. The <strong>Consumer Price Index (CPI)<\/strong> increased by <strong>0.3% month-on-month<\/strong>, falling below the 0.4% consensus forecast. On a year-over-year basis, headline inflation slowed to <strong>3.0%<\/strong>, also better than the 3.1% consensus. Core CPI, excluding volatile food and energy components, rose by <strong>0.2% month-on-month<\/strong> and <strong>3.0% year-on-year<\/strong>, both slightly below expectations. This softer inflation print is seen as bolstering the likelihood of the <strong>Federal Reserve<\/strong> implementing another 25-basis-point rate cut at its upcoming meeting, with a high probability of a subsequent cut in December.<\/p>\n<h2>Baker Hughes Navigates Anticipated Industry Downturn into 2026<\/h2>\n<p>Despite the positive domestic economic signals, the energy sector is bracing for a period of reduced activity. <strong>Baker Hughes (<a href=\"\/stock\/BKR\">BKR<\/a>)<\/strong>, a key oilfield services provider, has indicated that early signs point to <em>another year of low activity and reduced spending in 2026<\/em>. This follows a projected <em>slight drop in worldwide upstream spending for 2025<\/em>. Analysts have noted a reduction in EBITDA estimates for 2025 and 2026 for Baker Hughes, primarily due to anticipated challenges in North American and international markets.<\/p>\n<p>Specifically, <strong>North American upstream expenditures<\/strong> are expected to decline by <strong>10-15%<\/strong>, while <em>international spending<\/em> is forecast to decrease by <strong>5-10%<\/strong>. This outlook is influenced by a broader industry trend of <em>declining crude oil futures<\/em> and a persistent <em>supply glut<\/em>. The <strong>IEA<\/strong> has warned of a substantial global oil surplus, forecasting as much as <strong>4 million bpd<\/strong> in 2026, following a 2.35 million bpd surplus in 2025. This oversupply is driven by robust increases in global oil supply, particularly from non-OPEC+ nations like the U.S.<\/p>\n<p>Amidst these headwinds, Baker Hughes is strategically focusing on <strong>natural gas infrastructure<\/strong>, which positions it to capitalize on the global transition towards cleaner energy sources. The company recently topped Wall Street&#39;s third-quarter forecasts, reporting <strong>$7.01 billion in revenue<\/strong> and securing substantial orders for <strong>LNG technology<\/strong> and oilfield equipment, driven by strong global energy demand. Management has also <em>upped its full-year order outlook<\/em>, with analysts largely maintaining a bullish stance on the stock due to its focus on LNG and integrated energy technology.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways U.S. business activity saw a significant acceleration in October, with the S&amp;P Global Composite PMI rising to 54.8, 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