The chart below shows that the non-manufacturing ISM Business Activity Index has experienced a loose correlation with the BDI. Recently, however, as the non-manufacturing ISM's Business Activity Index has begun to move back above 50, BDI growth has remained stagnant, likely due to supply issues isolated to the BDI.

(I used the Business Activity Index component of the non-manufacturing ISM because it has a more robust history than the headline index -- the ISM began releasing the composite number just a few years ago. The data from the Business Activity Index is an adequate proxy for the overall index.)

ISM Services Business Activity Index (Deviation From 50) vs. Baltic Dry Index Source: Capital Link; St. Louis Fed

Now let's move on to the manufacturing ISM, which in itself is a good leading indicator of U.S. industrial production. The chart below suggests the relationship between the yearly change in the BDI and the difference from 50 for the manufacturing ISM has been slightly more significant, as anticipated.

This linkage makes sense when you consider that dry bulk shipping and rail would transport a large portion of the nation's manufacturing inputs and outputs. In fact, from 2002 through 2005 there is even some good evidence that the BDI was doing a pretty good job acting as a forward-looking indicator for the ISM. But growing demand from developing economies such as China and recent supply-side issues for shipping have diluted some of these predictive powers in recent years.

ISM Manufacturing (Deviation From 50) vs. Baltic Dry Index Source: Capital Link; St. Louis Fed