As we have been stressing in our Weekly Dry Bulk Reports this year, we have been of the view that a recession has been underway for months in much of the global economy including the United States. The uniqueness and magnitude of current global consumer distress is still not being acknowledged (and most likely is still unknown) by most pundits, government officials, economists, media outlets, etc. In recent reports, we have been discussing how retail sales are not adjusted for inflation and how simple analysis of actual purchases of goods often is not provided. We continue to stress that the purchase of actual goods remains in contraction and that this is incredibly rare. This typically only occurs in recessions.
In recent reports, we have discussed how this stark reality has been occurring in a huge number of nations including throughout the European Union, Brazil, Japan, South Korea, Russia, and the United States. In our view, most of the global economy is in a recession. Fortunately for the dry bulk market, though, China and India have continued to fare well. Dry bulk rates and demand for vessels have been able to fare fairly well in recent weeks, but the great distress occurring around the world must continue to be closely monitored.
In China, both the consumer side and industrial side continue to strengthen, and China appears more than ever before to be decoupled from the rest of the global economy. On the consumer side, retail sales growth has finally started to exceed inflation again. Retail sales growth averaged year-on-year growth of 3.5% in January/February. In comparison, inflation grew year-on-year by 1.6%. Previously, inflation in China exceeded retail sales growth for four straight months, including during September and October when the nation was not experiencing any surges in new coronavirus cases or related restrictions.
On the industrial side, year-on-year strength has also continued to intensify in China, with steel output continuing to fare particularly well. The most recently released data shows that daily crude steel output at large and medium-sized mills in China averaged 2.25 million tons during March 11 - 20. This is 5% more than was seen in early March and is up year-on-year by 10%. Steel production has remained strong and has now climbed to the highest level seen since June.
