This may be one of the shorter research notes of my lengthy global macro career. Yesterday, the IMF announced that it is taking up GDP growth rates globally and that it expects economic growth to accelerate going into the back half of this year, raising its full year GDP growth forecast to 4.6% from 4.2% in its prior forecast from April.
There are many proxies or leading indicators for economic activity, but one very telling one is simply the cost to transport dry bulked goods around the globe. If economic activity is set to accelerate so should the volume of dry bulked goods (think coal, iron ore, cement, grain, etc.) being transported. And with this, the rate at which these goods can be shipped, which is reflected in the Baltic Dry Index below. (We’ve also pasted a picture of The Sabrina, a bulk carrier, directly below for reference.)
The chart below about says it all. The price for shipping dry bulk goods is at a year-to-date low, and back to the same level we saw in 2003.
Nope, we aren’t seeing this acceleration in growth coming.
Daryl G. Jones