Ocean Shipping Cost as a proxy of Real Economic Activity

We proxy Global Real Economic Activity with the cost of shipping 6 major commodities: crude oil, natural gas, coal, grain, container & airplane parcel. We show that the business cycle decomposition of this newly called BiB indicator tracks very well the business cycle inferred from the world industrial production index (WIP). In a nowcasting exercise, we prove BiB to anticipate WIP one month ahead with a notable gain wrt. a drift less random walk. Our index outperforms the GREA proxy proposed by Kilian (coal shipping cost) as well as the ADS index from the US FED. Additionally, we compute the long run real cost, in $ per ton, for shipping our 6 major commodities together with their opportunity cost over recent decades (share of total import cost eaten up by transportation).