Wednesday, January 19, 2011

Which Indicator is Wrong?

At Pinnacle, we look at multiple indicators that we consider good leading indicators of global growth. Some of them are packaged indices that have multiple economic components, and some of them are market based barometers. Currently there is an interesting and eye-popping divergence developing between two market based barometers.

The chart below shows the Baltic Dry Index (blue line), which monitors global shipping rates, and the CRB Raw Industrial Spot index (black line), which is made up of 22 economically sensitive commodities. As you can see, typically the lines of the chart are somewhat in sync, but right now they are giving very divergent messages. So the question is, which indicator is wrong about the future direction of growth? We’ll be mulling this one over.