Global| Apr 06 2022Commodities, Shipping Costs, Inflation and Yields
by:Andrew Cates
|in:Viewpoints
Supply chain bottlenecks, disrupted trade flows and commodity price tension have been key hallmarks of the macroeconomic scene for some months now. But are these factors now moving into reverse? High frequency indicators of shipping costs – such as the Baltic Dry Index – certainly suggest this may be the case (see figure above).
This index has enjoyed a fairly tight correlation with indicators of real economic activity in commodity markets in recent years. And unsurprisingly it has equally enjoyed a tight correlation with global inflation surprises. Indeed its steep decline over the last six months presages a period in coming weeks where inflation outcomes could elicit far fewer positive surprises and even a few negative surprises.
This, in turn, could clearly be of some importance for policymakers and interest rate expectations in the period ahead. Indeed a relationship that may be worth watching closely against this backdrop is the evolution of activity in commodity markets and US Treasury yields (see final figure below).
Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
Andrew Cates
AuthorMore in Author Profile »Andy Cates joined Haver Analytics as a Senior Economist in 2020. Andy has more than 25 years of experience forecasting the global economic outlook and in assessing the implications for policy settings and financial markets. He has held various senior positions in London in a number of Investment Banks including as Head of Developed Markets Economics at Nomura and as Chief Eurozone Economist at RBS. These followed a spell of 21 years as Senior International Economist at UBS, 5 of which were spent in Singapore. Prior to his time in financial services Andy was a UK economist at HM Treasury in London holding positions in the domestic forecasting and macroeconomic modelling units. He has a BA in Economics from the University of York and an MSc in Economics and Econometrics from the University of Southampton.