Lower shipping demand indicates real state of global economy

November 9, 2015

Chinese Shipping Imports

Last week was another steady one for equity markets, with the news flow being broadly positive. In the UK we had another interest rate decision by the Bank of England, which once again voted to keep rates on hold at 0.5% with an 8-1 vote in favour. This was followed up by an attempt by the Governor, Mark Carney, to give further “forward guidance” as to when rates would begin to rise. Economists are now predicting that rates in the UK will rise in the later months of 2016, however, Mark Carney has lost some credibility in giving accurate timings, as the guidance appears to drift. In its inflation report, the Bank forecasts that inflation will return to its 2% target within two years as the short term effects such as the oil price shock and falling food prices fall out of the calculation.

In the US there was an upside surprise in the US jobs market data, with 271,000 jobs being created in October. This was significantly above what economists were anticipating, forecasting 185,000 on average. This had a negative impact on US treasuries and initially helped equity markets. This data is typically volatile month to month and it is difficult to extrapolate into the medium term, however, such a strong report can only point to a healthier US economy going into the festive season.

In contrast, the CEO of Moeller-Maersk (the largest shipping company in the world), Nils Smedegaard Andersen, warned that growth in the global economy is slower than primary forecasters are predicting. This is based on the lower than expected demand for shipping, pointing to weaker international trading volumes. The industry is already struggling with oversupply. Andersen cited a slowdown in developing nations as the primary cause, however, said that there are also concerns from Europe, with the weak Euro causing imports to be less competitive.

Index Open Close Change % Change
FTSE 100 6361 6353 -8 -0.13%
S&P 500 2079 2099 20 0.96%
Dax 10850 10988 138 1.27%
Cac 40 4897 4984 87 1.78%
Nikkei 225 19083 19265 182 0.95%

Friday will see the release GDP data from France and Germany as well as inflation and retail sales date from the US.