The Baltic Dry Index, an obscure economic indicator that monitors the health of the world's economy by tracking the price of shipping dry goods over oceans, has fallen to its lowest level in 29 years.

The index, compiled daily by London-based Baltic Exchange, is a daily number that tracks the prices shippers charge to send huge cargo ships of dry goods across oceans. It is believed to be an excellent gauge of the health of the world economy, although its accuracy has been called into question in recent years — in May 2008, for example, just before the recession, the Baltic Dry hit an all-time high of just under 11,800.

On Monday, the index lost almost three per cent or 18 points to 590 points. That's down by 60 per cent since the start of November, and now down to its lowest level since August 1986. It's not far off the all-time low set the month before that.

That's a bad sign for the global economy, experts suggest, because reduced demand for raw materials suggests companies have less faith in their economic prospects.

"The dry bulk market has seemingly gone dead silent, with worries circulating among many owners that there is little reason to operate vessels under the currently prevailing freight rates," George Lazaridis, head of market research and asset valuations at Allied Shipbroking, said in research note published on Monday.

The index's plunge suggests shippers are having to cut prices in order to drum up business. The world's largest ships are known as "capesize" because they are too big to pass through the Suez or Panama canals (so must take the longer routes around the southern tips of Africa and South America) and demand for those supertankers has been especially soft in recent weeks. 

The average daily earnings for capesize vessels, which typically transport 150,000-tonne cargoes such as iron ore and coal, declined $103 to $6,604 according to Monday's data. That's a fraction of what those ships can usually charge to ship large amounts of dry commodities.

The plunging price of oil has also been a factor in shipping, as an increasing number of speculators are renting out giant ocean liners as temporary storage containers for oil, waiting for the price to rebound.

With files from Reuters