Charts of the Week: Contained for Now

Maritime trade Maritime trade volumes in the Red Sea have slumped following the wave of Houthi attacks that commenced last October. More specifically, freight capacity in that area fell to more than half of pre-attack volumes, registering around 203,000 of twenty-foot equivalent units (TEU) on 1 Jan 2024. In the meantime, latest estimates from the Kiel Institute suggest that aggregate global trade volumes fell by 1.9% m/m in December (chart 1 below).

Energy prices The Red Sea's strategic location, alongside its close proximity to major energy-producing nations, underscores its importance as a key chokepoint in the oil and gas trade, as well as for global supply chains. Interestingly, despite this critical role, the prices of key energy commodities, like oil and natural gas, have remained relatively stable and are significantly lower than their levels six months ago. This stability is arguably surprising, especially considering the recent substantial increase in geopolitical risk (chart 2).

Shipping costs Aggregate shipping costs have additionally been declining in recent days. That is the message from the decline in the Baltic Exchange's Dry Index which measures those shipping costs. That index has declined sharply over the past several days, and stood at a four-month low on Tuesday January 16th. This decline resonates with the softening in global trade and the recent stability in energy prices. It implies, at least for the time being, that recent disruptions in the Middle East have not significantly impeded global supply chains in a way that could undermine the progress that’s been made in controlling global inflation (see chart 3).

Supply chain bottlenecks Latest regional manufacturing surveys from the US, specifically the New York Empire State survey, reinforces that message about supply chains. The details reveal that the supplier delivery time index saw a modest rise in January, but that came from a very weak base in December. As chart 4 further suggests, and after smoothing out for the underlying volatility in that series, latest levels suggest few (if any) supply chain problems. The lead relationship of indicators such as these over US inflation further suggests that disinflationary pressures ought to persist in the immediate months ahead (chart 4).

China’s labour market Apart from the normal spate of growth and production-related releases unveiled this week, China also resumed the publication of data for youth unemployment, albeit with a modified methodology. The new unemployment rate measure, which now excludes students, was 14.9% in December 2023. For context, the old measure, which includes students, reached a record-high of 21.3% in June 2023 before its discontinuation. Zooming out, China also revealed that its population shrank for a second straight year in 2023, underscoring one of the longer-term challenges it continues to face as its economy evolves.

Post-pandemic recoveries Demographic shifts are a significant factor for many major economies. While the US economy's robust post-pandemic recovery is well-recognized, especially in comparison to other major economies, it is less impressive when demographic changes are factored in. In chart 6 below, we compare real per capita GDP levels in the US, Japan, the Euro area, and the UK throughout the post-pandemic period. This adjusted measure reveals that up until the end of 2022, the Euro area's recovery was almost on par with that of the US. As of the third quarter of 2023, based on GDP and population data, the US's recovery is also only slightly ahead of the progress made in the euro area and Japan from the start of 2020.