Lead economic indicators provide crucial input in forecasting future growth rates. Baltic Dry Index (BDI) happens to be one such indicator. It measures the movement of freight cost while transporting dry bulk cargo via sea. Indirectly it is a measure of trade activity across the globe. An increase in global demand for commodities indicates that production is bound to increase. And that demand movement is tracked via the trade activity. BDI does this job. Thus, it signals beforehand that economic growth is bound to improve or decline. Hence, it is avidly followed by many.
But what it is hinting currently? A complete doom, it seems. The BDI plunged 8% in a single day which is probably the biggest drop in last six years. Peaking Chinese inventory at ports signify that movement of bulk cargo has slowed down. And this has led to a fall in the index. This is not good news. It signifies that global demand has slowed down at least for iron ore which is a widely used industrial commodity. Slowing demand will jolt production and hurt global growth rates. Thus, it seems that the global recovery may take longer than usual.
But what it is hinting currently? A complete doom, it seems. The BDI plunged 8% in a single day which is probably the biggest drop in last six years. Peaking Chinese inventory at ports signify that movement of bulk cargo has slowed down. And this has led to a fall in the index. This is not good news. It signifies that global demand has slowed down at least for iron ore which is a widely used industrial commodity. Slowing demand will jolt production and hurt global growth rates. Thus, it seems that the global recovery may take longer than usual.
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