Baltic Dry Index has Increased Substantially since January of 2016
The Baltic Dry Shows Impressive Growth
This time last year, investors were concerned about the health of the Baltic Dry Index. This year, it's showing strength.
The Index
The Baltic Dry Index is maintained by the Baltic Exchange. It measures the costs of shipping various raw materials around the world via different routes and 3 major subindices (Capesizes, Panamaxes, and Supramaxes). It is highly sensitive to seasonal conditions and seasonal demand cycles.
As an economic indicator, investors and analysts tend to see this index as a barometer of Supply and Demand health. When the index steadily increases in clear seasonal cycles, it can indicate robust and consistent demand and commodity pricing. When it is highly volatile or declines rapidly (especially an unseasonable fall), it can imply a drop-off in demand or over-stuffed inventories.
By The Numbers
The most recent data on the Baltic Dry Index (BDIY)
What the Numbers are Saying
The Baltic Dry Index increased from 354 to 914. That’s an increase of just over 158%. Intra-year, rates of increase (or decrease) in this index can tell us any number of things about shipping’s current sensitivity to things like energy commodity prices to current efficiency of supply chains. An increase this large year over year shows a substantial recovery in an economic indicator that many had been voicing concern over.
The decline in January of the Baltic Index is entirely expected, as prices routinely decline considerably after the Fall and Holidays related shipping cycle. This year, the index has fallen 4.89%, which is normal- in fact considerably less dramatic than 2014 and 2015. This decline has continued until somewhere in mid to late February in recent years.
As the Baltic Dry Index is not a reliable market timing tool, investors, economists, and international business leaders will likely see this current trend as part of a somewhat increased global demand and more stable oil prices. In recent years, fears about deflation in oil prices have set very low expectations for the Baltic Dry. Should reflation trends in energy commodities continue, we may see a more robust Baltic Dry in 2017.
What Does it Mean for Oregon Investors?
Portland- along with other major cities across the U.S.- has seen a slight decline in consumer prices of food, beverages, and other consumer concerns. As we noted just last week, this decline has been somewhat surprising.
If the Baltic Dry Index’s considerable recovery is any indication, consumers may see higher inflation in 2017. Inflation- as measured by the Consumer Price Index (CPI)- is a complex calculation. Even with a burgeoning cost of shipping goods, deflation in things like housing and healthcare cost could offset broader inflation. Nonetheless, for those who have been fretting over the decline of the Baltic Dry’s indications for inflation may take some comfort in this year’s price increase.
Baltic Dry Index
Disclaimer
This information is solely a representation of publicly available facts intended for educational use only. This is not a solicitation to buy or sell any public or private Security, in any city named in the article or elsewhere. The Baltic Dry Index is not to be used as a timing tool for sale or purchase of marketable Securities. All information obtained from Bloomberg.com