As we had argued in our conversation "The link between consumer spending, housing, credit and shipping" back in August 2012:
"The relationship between container shipping and consumer spending, traffic is indeed driven by consumer spending".
In October, in our conversation "Credit Chadburn on full ahead" we argued the following:
"Moving on to the subject of looking at different indicators which could clearly indicate if effectively a proper rebound is on the way and if the credit bell has arguably rung three times which would mean an acceleration in global economic growth led by the US economy, we noticed recently a significant rebound in the Baltic Dry Index"
- in yellow the Baltic Dry Index,
- in orange US Family Housing Starts
- in white US Furnitures Sales.
The most obvious reason behind the lack of rebound in the Baltic Dry Index is stemming from the ship owner's cost mostly affected by fuel oil (Bunker prices) and the lack of price elasticity for the shipping industry given the glut of shipping capacity which is slowly being digested following the bomm and bust of the container shipping industry fuelled by cheap credit with non-performing loans still encumbering major players in the structured finance space such as German bank Commerzbank.
As indicated by Isaac Arnsdorf in his Bloomberg article from the 2nd of January entitled "Shipping Loses as Faster Trade Means Record Fuel Costs":
"The glut of shipping capacity and unprofitable rates may discourage some owners from speeding up. The merchant fleet of 86,500 vessels moved at an average 5.94 knots last month, compared with 6.48 knots a year earlier, data compiled by Bloomberg show. A very large crude carrier hauling 2 million barrels of oil can earn about $12,000 a day more by sailing at 10.5 knots instead of the standard 14.5 knots, according to DNB Markets, a unit of Norway’s largest bank."
Back in our May conversation we indicated the following reasons behind the growth differential between both economies was due to credit conditions:
"In recent conversations as well we have been highlighting the growth differential between the US and Europe ("Shipping is a leading deflationary indicator"):
"We have long argued that the difference between the FED and the ECB would indeed lead to different growth outcomes between the US and Europe (US economy will grow 2.2% this year versus a 0.4% contraction in the euro area, according to the median economist estimates compiled by Bloomberg):
"There has been little change in credit growth, which remained weak in November. The annual rate of decline in loans to the private sector (adjusted for loan sales and securitisation) remained at -0.5% in November. This development reflects further net redemptions in loans to non-financial corporations." - Mario Draghi, today's ECB conference.
EU Lending Breakdown - Retail Lending - Source Bloomberg:
"Following three months of marginal growth, loans outstanding to euro zone households total 5.25 trillion euros, within 0.5% of September 2011 all-time highs. Within this, consumer credit outstanding continues to tumble and now stands below 600 billion euros for the first time since mid-2007, while mortgage lending remains resilient." - source Bloomberg: