Tuesday, July 6, 2010
More Bearish Prognosis.
The Baltic Dry Index (BDI) measures the cost of shipping dry bulk goods â€“ commodities such as iron ore and coal, for example. The BDI has fallen almost in half since the end of May, but let's put that in perspective. The index saw a 95% drop during the financial crisis of 2008. If the price of moving raw materials falls, that's because demand for finished goods is also slowing down. Company restocking is now ending, and we're waiting to see what sort of 'real' demand remains to pick up the slack once government stimulus is removed. Therefore, a drop in the BDI suggests that the global economy must be slowing down.