In October 2008, as the repercussions of the financial crisis were starting to ripple through the global economy, I noticed a press release from Swedish truckmaker Volvo saying that its European order book had fallen by more than 99 percent between the third quarters of 2007 and 2008 — to just 155 from 41,970. That prompted me to study various other real-world activity measures ranging from shipping to air freight, and to conclude that “the news is all bad and getting worse, fast.” The same exercise today, I’m afraid to say, leads me to a similar conclusion about the growth outlook.
Here’s a chart showing what’s happening to the volume of goods being shipped in containers from China’s ports, one for the country and one for Shanghai. Both indexes are compiled by the Shanghai Shipping Exchange, and cover shipments to the rest of the world including Europe, the U.S. and Africa; activity is down more than 40 percent from its peak in mid-2012:
The traditional global shipping measure is called the Baltic Dry Index. Shipping purists (who rival gold bugs in their dedication to minutiae) will tell you it mostly reflects how many vessels are afloat on the world’s oceans; a glut of shipbuilding means more boats available, which drives down the cost of shipping bulk raw materials such as iron ore, steel and coal. But given the fragile state of the global economy, it’s hard to shake the feeling that the index has been trying to tell us something important about global demand in recent years:
There’s a similarly contractionary pattern in the available data on air freight. Here’s a chart showing tons of goods shipped per mile across U.S. skies since the start of the decade:
And here’s the equivalent chart for Europe, this time in tons per kilometer:
While neither chart shows the volume of airborne freight falling off a cliff, both are drifting lower — which is not what you want to see at this point in what is supposed to be a nascent global economic recovery.
So what about Volvo’s order book? In the third quarter of 2015, the company had orders for just 42,648 trucks, a 30 percent slump from the end of 2014 and the lowest level in two years:
While that’s nowhere near as dramatic as the 2008 decline, it does suggest that companies who are in the business of moving goods by road from A to B aren’t investing in any expansion of their fleets.
There’s a scene in the film adaptation of Annie Proulx’s Pulitzer Prize-winning novel “The Shipping News”: An old newshound explains to newbie journalist Kevin Spacey how dark clouds on the horizon justify the hyperbolic headline “Imminent Storm Threatens Village.”
“But what if no storm comes?” Spacey asks. The veteran replies with a second-day headline: “Village Spared From Deadly Storm.” Unfortunately, having survived the storm fanned by subprime mortgages and the credit crisis, the clouds are gathering again over the global village we live in; they are getting darker every day.
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