June 12, 2011

Baltic Dry Index - What Recovery?

The Baltic Dry Index is a measure of shipping volume and is considered by many to be a precursor to future economic activity and hence recession or recovery.  Apologists for BDI weakness claim a number of reasons for it's softness.  MJ Perry at Carpe Diem first made me aware of it back in 2009, and while he seems to be at times a proponent of strong free market capitalism, his apologist nature for BDI recovery is ringing hollow.  

I went back and took a look at it this morning and over a five year period, this is what it looks like.

Even in the window of recovery from it's late 2008 lows through mid 2010, post 2010 the trend is clearly downward.  This combined with unemployment, Dow performance consistently downward over the last 6 weeks, and persistent housing market problems I'm thinking double dip recession.  

With the huge stimulus and omnibus spending bills of 2009 and the efforts at quantitative easing having pretty much run their course, the transient nature of the stimulus efforts are running out now.  All that's left is the return to the natural state of the economy, which is worsened by the debt situation and failing consumer confidence.  Keynes is dead. This combined with the trailing inflationary pressure, could see a return to stagflation: high unemployment and high inflation.  That bodes badly for Obama.  unfortunately it bodes badly for everyone else as well.


  1. The BDI is not a tool that can be used to measure unemployment figures (unless those in shipping!!!). It is surplus tonnage that is stopping a recovery in the freight market not a lack of demand. Demand and volume of commodities moved i.e Iron Ore and Coal specifically. Is up on what was shipped in the bull market. Suggest you use other indicators for your pieces.

  2. I'm not suggesting it's a measure of unemployment. It is a leading edge indicator of economic activity and unemployment is a trailing indicator. A bad BDI index today is a possible indicator of future unemployment.

    Take a look at the chart - now consider flat GDP and flat (and high unemployment. What I said in June was that there was no recovery, and the BDI was showing that future unemployment would remain static, and bad, much like this graph on BDI was indicating.

    And what has happened since? Unemployment in June was 9.1%. September - 9.1% also.


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