Thursday, June 24, 2010

Baltic Dry Index Tumbles

(Export Development Canada – Peter G. Hall)

Summer has arrived in the Northern hemisphere, and those expecting a quieter pace may get more than they bargained for. As we enter the season, a growing number of key international indicators are on the wane. One of the more dramatic is the Baltic Dry Index (BDI), an important barometer of global trade activity. In recent days, the Index has seen an alarming freefall. What’s going on?

Increased global trade has drawn growing attention to this particular Index over the past decade. The BDI tracks the prices of shipping raw materials that are key to global industrial production around the world, in vessels of varying size. As movements of these materials indicate anticipated production levels, the Index has increasingly proven itself as a leading indicator of global production and trade.

The steepness of the current tumble is unusual. For a 15-day period ending in mid-June, the Index lost one-third of its value. Although the post-recession period has seen the Index stage two other notable declines, one has to go back to the onset of the recent recession to see a drop this dramatic. The turn of events is unfortunate, as it interrupted what looked like a decent, sustained run of growth.

Read more or watch the video here.