Global trade early indicator: the Baltic Dry Index
How great would it be if there were a key figure or curve that could predict economic booms and downturns? Well there is: the Baltic Dry Index (BDI)!
The BDI is published by the Baltic Exchange in London and is the price index for the worldwide shipping of freight such as coal, iron ore and grain on standard routes.
There is an unmistakable correlation between cargo rates and demand. The Baltic Dry Index identifies the shipping costs of commodities and precisely measures the volume of global trade at the pre-production stage. This makes it a lead indicator for the global economy.
In contrast, other indices examine later stages of economic trends, when semi-finished or finished products have already been made from the raw materials.
The bigger the volume of goods to be shipped, the greater the demand and the higher the price of forwarding. An upturn in the BDI signalizes an approaching rise in global trade, while a downturn forecasts the opposite.
In retrospect, one can say that the course of the BDI allows unambiguous conclusions to be drawn about the real development of global trade, about 8 to 12 months in advance!
Click the link below for the BDI fever chart: