Global Outlook

Baltic Dry Index

Contributed by eResearch

By Bob Weir

In our July 5th Clarion, we highlighted the Baltic Dry Index which, at the time was plummetting. It continued to do so for another 10 days, which marked 35 straight days, a record, that this Index declined.

The Baltic Dry Index (“BDI”) measures the amount of dry cargo circumnavigating the globe and, thus, is a good indicator of the amount of global trade being conducted. It tracks the cost of shipping raw materials around the world in ships of various sizes and, as such, it has become an important indicator of global production and trade. Key commodities being shipped include iron ore, coal, and grain, i.e., dry goods.

Originally, when analyzing past trends, we thought the BDI was a leading indicator for stock market turns, both up and down. Alas, closer examination shows no real definitive trend. Sometimes the respective indexes were coincident, sometimes the BDI was a leader, and sometimes it was a laggard.

Nevertheless, it still represents a sound marker of the pace of international trade. Since finishing its record 35-day fall to 1,700 on July 15th, the BDI has recovered 45%, closing at 2,468 on August 13th. An upwards trend, if it continues, would suggest an improvement in the prospects for global economic recovery.

We will continue to monitor this important index.