Statistics from the Office of National Statistics this morning showed that the UK went into reverse in the last quarter of 2011, when the economy shrank by 0.2% – but as the Baltic Dry Index shows, the global economy is looking even more worrying.
The index – often used as a proxy for the health of the global economy as it reflects the prices charged for shipping commodities such as metals, coal or grain around the world – has fallen by 61% since October.
The index was at 842 at yesterday’s close – down from its 12-month high of 2173 last October.
Nick Bullman, managing partner at risk consultant Check Risks, said the index is a good way of looking at the risks to the global economy, “as it tends to be where they hit first”.
According to Bullman, its initial collapse in October was driven primarily by a fall-off in demand from China, where declining housing prices pushed purchasing managers to cut back on orders for the raw materials whose transport the Baltic Dry Index reflects.
He said: “This collapse looks similar to the falls we saw in the Baltic Dry ahead of the recessions of the late 1970s and early 1990s – but this drop is actually steeper.”
Bullman added that it was also a more direct indicator of global economic health than government-produced statistics. “Personally, I’m not interested in employment data and GDP figures because they’re manipulated,” he said.
“US unemployment is in high double digits at moment, not 9% - the way the US government collates the data means the long-term unemployed just fall out of the numbers.”
Read more: Chart of the Day: The Baltic Dry Index