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BDI no longer indicator of real economy - UNCTAD

Steel News - Published on Tue, 12 May 2009

Lloyds List reported that the Baltic Dry Index is no longer a bellwether of the world’s economy, according to new research. Pundits who watch the four route composite index for signs of industrial decline and recovery might do well to look elsewhere, because the numbers have lost touch with the industrial reality.

According to the Geneva based United Nations Conference on Trade & Development, the index has in fact been out of kilter with industrial production for the last 6 years.

UNCTAD says in its latest newsletter that \"Observing the development of the BDI and its increased volatility over recent years, it is perhaps no longer the excellent indicator that it was during the period 1985-2002. The BDI as a compendium of charter rates reflects not only changes in demand for raw materials but also changes in the supply of shipping capacity. This contributes to the fluctuations of the BDI and thus reduces the usefulness of the BDI as a leading indicator for industrial production.\"

Referred to by one business magazine as the best economic indicator you’ve never heard of, the Baltic Dry Index is influenced to a much larger degree by financial traders with no direct interest in the industry.

UNCTAD said that \"Just as in dry bulk shipping, the global downturn in container ship charter rates is attributable not only to the downturn in demand, but also to an oversupply of shipping capacity. Today\'s tonnage on order in the world’s shipyards amounts to almost 50% of the existing container-carrying capacity, and already today 11% of the container ship fleet is reported as idle or laid up.\"

(Sourced from Lloyds List)

Posted By : admin on Tue, 12 May 2009
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