SUEZ CANAL TRAFFIC POINTS TO GLOBAL SLOW-DOWN

Here’s an indicator I had never seen before.  Reuters is highlighting the slow-down in Suez Canal traffic as a possible harbinger of stagnating global economic growth:

“As this week’s Chart of the Week indicates, traffic through the Suez Canal in Egypt – a key cargo transportation route – has nosedived in recent weeks and months. Currently, Suez traffic is only slightly better than flat compared to year earlier levels. Unsurprisingly, perhaps, the trends in global GDP growth tend to mirror those in traffic transiting the Suez canal; it is logical that trade volumes would flag during periods of contraction or sluggish growth, as is most vividly illustrated by the close correlation between the two indicators at the height of the financial crisis from late 2008 through 2009.”

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Geoff

    I traversed the Panama Canal recently and there was a lineup several ships deep. If we had been late for our scheduled entry time, we would have been SOL. Our ship paid over $300K for a one-time pass through. Apparently, that price is worth it when one factors in the alternative cost of travelling around the horn in terms of fuel, labor and, of course, time.

    The Canal generates around $2 billion in revenue, $1 billion of which is profit (nice margin). You have to wonder why the USA gave it up, but I guess $1 billion is a drop in the bucket for them. Not so for Panama.

  • Gary_UK

    Very interesting, thanks Cullen.

  • Anon Jon

    Definetly interesting but I wonder how much all the piracy in the region has affected shipping traffic through the Suez Canal.

  • Hindi

    Suez traffic doesn’t seem to have tracked the 2000-2002 recession. Perhaps 9/11 effect? Iraq war started March 2003. I wish we had more data on this than just since 2000.

  • Gerry

    a very doubtful tool for gauging economic trends:
    simple calculation proves that any route around the kaap die goeie hoop is cheaper.
    you avoid the extreme (insurance) cost around the horn of africa…

  • Leverage

    Correlation is not 1-on-1, but it did track it, although it was very mild recession deceleration did not become negative. That recession was a non-recession, with Greenspan going wild and banks with him creating tons of money to propel real estate speculation, economy was ‘booming’ is short time.

    I see this as a proxy or similar to the Baltic Dry Index, nice indicator anyway.

  • http://www.conventionalwisdumb.com Conventional Wisdumb

    “Suez traffic doesn’t seem to have tracked the 2000-2002 recession.”

    Not sure if this was obvious but the graph tracks Real World GDP so the US component at around 25% is important but in a mild recession in growth terms it won’t show up as much. I think the ROW more or less made it through that period without a significant slowdown in growth as compared to 2008.

    This seems to show a coordinated global growth slowdown which is much more serious overall.

    Interesting proxy.

  • Jack

    The US gave up the Panama Canal because the PEANUT BRAIN WORST PRESIDENT IN uS HISTORY UP UNTIL TODAY’S president jimmy carter GAVE IT AWAY!!! Another bleeding heart lib. We built the canal at an unbelievably HIGH human toll and this jackass lib gave it away