German business expectation forecasts weak shipping demand ahead
The German IFO Business Climate Index can illustrate potential opportunities and risks for the shipping industry in the short to medium-term.
Investors and analysts use the metric as a leading indicator for Germany and its surrounding European countries in its predictions for the months ahead.
Europe’s manufacturing activity is important to China because the continent is its largest trading partner, exchanging mostly manufactured or industrial products. In 2012, imports of manufacturing and transportation equipment from China made up 32.2% of EU’s total imports.
Thus, higher activity in Germany tends to benefit shipping companies that transport key industrial input materials, such as iron ore and coal. German business expectation fell for second months straight The German manufacturing business expectation fell to 101.6 in April from 103.6 in March, its second consecutive decline since February this year.
This points to a negative outlook for Germany’s factory orders because business expectation has historically preceded changes in annual factory orders by two months, with a strong positive correlation of 0.83.1 Lower factory orders will mean lower production, which will indirectly negatively impact shipping demand.
Although they’ve escaped a sudden collapse in the Euro due to quantitative easing by the European Central Bank last year, recent data suggests that Europe’s recovery will be wobbly as austerity measures continue to reign in on spending.
China’s manufacturing activity was negatively affected by Europe as new export orders fell in April, based on HSBC’s preliminary manufacturing purchasing managers’ index (PMI) report.
People sometimes forget that policymakers can influence the market On a positive note, European and Asian markets climbed higher as investors begin betting on policymakers to act to support global economic activity.
Yet, with May right around the corner, investors will want to be cautious. Policymakers may also refrain from really doing anything until economic fundamentals deteriorate further. Dry bulk shipping companies, such as DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Partners LP (NMM), and Safe Bulkers Inc. (SB), will be negatively affected if global markets sell off again this summer, and so will the Guggenheim Shipping ETF (SEA) that invests in high dividend paying shipping companies.
But if the market does sell off, it may present a nice buying opportunity because policymakers will likely act to support the global economy.
The German IFO Business Climate Index can illustrate potential opportunities and risks for the shipping industry in the short to medium-term.
Investors and analysts use the metric as a leading indicator for Germany and its surrounding European countries in its predictions for the months ahead.
Europe’s manufacturing activity is important to China because the continent is its largest trading partner, exchanging mostly manufactured or industrial products. In 2012, imports of manufacturing and transportation equipment from China made up 32.2% of EU’s total imports.
Thus, higher activity in Germany tends to benefit shipping companies that transport key industrial input materials, such as iron ore and coal. German business expectation fell for second months straight The German manufacturing business expectation fell to 101.6 in April from 103.6 in March, its second consecutive decline since February this year.
This points to a negative outlook for Germany’s factory orders because business expectation has historically preceded changes in annual factory orders by two months, with a strong positive correlation of 0.83.1 Lower factory orders will mean lower production, which will indirectly negatively impact shipping demand.
Although they’ve escaped a sudden collapse in the Euro due to quantitative easing by the European Central Bank last year, recent data suggests that Europe’s recovery will be wobbly as austerity measures continue to reign in on spending.
China’s manufacturing activity was negatively affected by Europe as new export orders fell in April, based on HSBC’s preliminary manufacturing purchasing managers’ index (PMI) report.
People sometimes forget that policymakers can influence the market On a positive note, European and Asian markets climbed higher as investors begin betting on policymakers to act to support global economic activity.
Yet, with May right around the corner, investors will want to be cautious. Policymakers may also refrain from really doing anything until economic fundamentals deteriorate further. Dry bulk shipping companies, such as DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Partners LP (NMM), and Safe Bulkers Inc. (SB), will be negatively affected if global markets sell off again this summer, and so will the Guggenheim Shipping ETF (SEA) that invests in high dividend paying shipping companies.
But if the market does sell off, it may present a nice buying opportunity because policymakers will likely act to support the global economy.