The signs of a slowdown are monthly indicators for each country in the world. We know that they are weak in the United States of orders for industrial products heavy survey of the trends of the employment services industry. And as Rana Foroohar points out in his important piece this week, may be some time before that none of this improves in America.
But it is now growing, drums which is spraying in the global system, and people says from falling housing prices in China to unemployment in Europe to interest rates and inflation in Brazil.
The problem is that the data does not square with a vital indicator of industrial activity in real time: the price of iron ore. Yes, iron mineral, one of the most reliable economic crystal balls in the world.
Almost all statistics are statistics from government agencies trying to analyse a range of data. They do surveys of individuals and businesses; collecting and processing auxiliary codes in payroll, tax receipts, trade flows and home sales. Then adapt to all the data of seasonal climate and holiday factors; added in previous patterns; estimates of the number of births or deaths or new companies were formed or not. And then there is a number. All these numbers are subject to revision, and almost all are looking back.
And then you have to take into account the price of iron ore: lumpy, dirty, heavy metal which is the main ingredient of steel, the ingredient without which there is no steel. Iron ore is used to create the smelter, and which in turn is mixed with carbon and manganese to produce steel. For that reason, it has said that ore of iron (with oil) is the key commodity which fuels the global industrial economy.
What makes iron such a good width of what is really happening in the global economy in real time is that it is not particularly susceptible to financial manipulation. Transactions of oil is a complex market where constantly be crosscuts price not only by the supply and demand, but also by derivatives and futures that are marketed worldwide. The same is true for many metals such as copper. And unlike other vital elements in the industrial economy, iron ore is bulky and difficult to stocks in mass. You can create up to months of copper oil supply or even, but storage of iron ore would be so huge and expensive that it is not only feasible.
So if you are raising the price of iron ore, is because someone needs now that steel. And if they are tracks fabrication of steel, has given that they used steel to build something like a car or a building or railway. And in recent months, the price of iron ore has been climbing constant - as it did for years prior to 2008 and as it has done since 2009. In fact, the price of iron ore is today more than 60% higher than a year ago.
The main buyer, of course, is China, which produces something of the order of 45% of steel in the world. Property prices might be falling, but it is still building. India is starting to spend aggressively in infrastructure and is so Indonesia and, of course, of Brazil, which need to update to host the next World Cup and then the Olympics.
China purchase means that Brazil is in boom and Australia also, because the two countries do not produce much of the world fine iron ore. And that means that it is increasing the shipbuilding industry, which helps South Korea, and then must take into account all those companies that benefit also.
Iron ore, dirty and the environment challenging although: is an indicator in real time, a barometer of activity as old as the Earth which offers to a better reading of what is happening really than many of the complicated but erroneous statistics that can create the best statistical minds of our time. A lanky and dusty metal which provides translucent is clarity about what is happening. Meter shows only the acceleration, and to see the price of iron ore placement and continue to drop, other signs of a global slowdown is going to be just so much noise.
Financial Insights
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