Rising shipping costs to impact global inflation

Rising transportation costs add to near-term global inflationary pressures

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Supply chain bottlenecks in the global shipping and semiconductor markets are adding to near-term inflationary pressures, Fitch Ratings says in a new report released recently.

According to the credit rating agency, global demand for manufactured goods is rebounding strongly, reflecting buoyant demand for electronics and other durable goods from homebound consumers, surprisingly resilient private sector investment in the U.S. and recovery in China.

Fitch says global trade has recovered faster than expected and, combined with “dislocations” in the container shipping sector as a result of the pandemic, ocean freight costs have soared since November.

On some routes, freight rates for container ships have quadrupled, and the recent temporary closure of the Suez Canal has intensified bottlenecks. Meanwhile, global semiconductor industries are also struggling to meet rapidly growing demand, while supply delays have reached record levels, according to some business surveys.

“We expect these supply bottlenecks to ease in 2H21. Underlying inflation rates in the services sectors and wage growth remain low in the US and Europe. Nevertheless, short-term upward price pressures are significant and growing. Balance of payments data show that the cost of freight transportation services was $32 billion in the U.S. in 2020 (0.2% of GDP) and €51 billion in the EU27 in 2019 (0.4%),” Fitch notes.

Source gCaptain

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