SIW1070imagelThey say that hindsight is a great thing. But it really depends on what you’re looking back at. In the 1950s young men wrote plays looking back in anger at what had gone before and not much liking what history had bequeathed them. More than fifty years later, the ship-ping industry is doing the same; looking at what it has inherited and wondering about where its future lies.

So, What Do We See?

Our Graph of the Week presents over a decade of hindsight. First, there is global industrial production (IP), a major influence on the shipping markets. Second is how that affected earnings in the form of the ClarkSea Index (a composite index of shipping market earnings). Changes in earnings are clearly influenced by the direction of industrial activity. Largely positive throughout 2000-08 (averaging 2.8% pa but often much more) it caused mostly positive and substantial movements in earnings.

It’s in Front of You…

Lastly, there is the OECD’s leading indicator (CLI), another composite index but one of key short term economic variables that signals turning points in economic activity. It has done a pretty good job of this, as the graph shows, and from experience turning points in the indicator are followed 4-8 months later by turning points in industrial activity. But, will it continue to pro-vide that useful, even positive, outlook to future output?

Good Views and Bad…

The last time we looked at these trends was in the desperate days of 2009. The slump in the CLI and industrial output was un-precedented. We wondered whether there would be a recovery and, if so, would it be slow and painful or would the damage to earnings be just a short, sharp shock.

The good news was that the econo-my climbed out of the deep trough of 2009 quite quickly. The turna-round, first in the CLI, then output and lastly for the shipping markets was complete by early 2010. The bad news is that it lasted no time at all and by 2011 we were back in recession again, from which point the slow and painful period began.

Viewing the Negatives…

Two years further on and the picture is darker. The CLI, the first harbinger of hope, has remained more or less flat and has only recently crept out of negative numbers for the first time in those two years. IP growth has declined continuously since April 2010 and, at last look, had hit zero. Mean-while earnings have triple-dipped with growth remaining in negative territory since November 2010.

Time for a Dark Room…

It’s no wonder the shipping business looks back in anger; the global economy (and its own past profligacy) have bequeathed a scarred landscape for it to look up-on. It is not a pretty picture and no amount of photo-shopping is going to change that. Perhaps only a lie down in a dark room and a re-focus can provide the cure. Have a nice rest.

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