A giant ball-bearing outside SKF's global headquarters in Sweden. Photo: SKF

A giant ball-bearing outside SKF's global headquarters in Sweden. Photo: SKF

Trade Figures Worsen

Issue 135, 16th August 2015

Outside a factory office in Sweden, a giant metal ball stands in gleaming isolation. The size of a statue, it is a giant ball bearing, marking the global headquarters of SKF, the world's largest ball bearing manufacturer. It is one of the greatest, unsung monuments of the modern era.

From the drawers in your desk to the spinning parts in your washing machine, ball bearings play an essential part in the continual, accelerating motion of our everyday lives. They are invisible to the consumers who use them and a tiny component in a product's total cost for the factories that order them every month, but in measuring the stuff we buy, they are the perfect barometer of global trade. And they are sending a rain warning.

German imports from Slovakia, for example, represent the largest flow of ball bearings outside Asia. It is a trade route that keeps the moving parts of Europe's industry turning, carrying more than 50,000 tonnes of ball bearings last year, equal to the weight of five Eiffel Towers.

But the trade route's tonnage has dropped by nearly 12 per cent so far in 2015. In dollar terms, it is down by more.

The falling figures have been frighteningly consistent month-on-month and are reflected across the Eurozone, especially in Italy, but what is most troubling is that the contraction appears to be spreading.

Germany is the largest ball bearing supplier to the UK and weakness in the Euro should have lifted UK imports, but instead, they are down by more than 10 per cent this year. Imports into Japan and the US showed signs of slowing growth earlier this year, but monthly figures in both economies are now beginning to flash red.

Shares in SKF are meanwhile being punished, down 27 per cent since April, after it issued a negative outlook for the quarter ahead.

Ball bearings are just one indicator of economic activity and in service-led economies such as the UK, they are arguably increasingly irrelevant, but in 2007, they proved a startlingly prescient indicator of the recession that was to follow, falling in the US a full year before contraction was visible in GDP figures or the Dow Jones Industrial Average. Customs statistics show how a recession that began in America then spread to the UK and Europe, finally hitting China.

An almost identical pattern is visible today, except the current crisis appears to have begun in Europe. Through a cloud of macro data, it is the clearest possible reading of a decelerating global economy. Germany's Dax Index closed Friday at 10,985, whilst the FTSE All Share sat at 3,588.

Outlook: EU & UK negative. We launched the ball bearing trade flow monitor in April, with an outlook of “EU negative.” The DAX has since declined by 7.5 per cent.

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