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
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