Shipping costs are rising as hundreds of container ships that typically transit the key maritime artery of the Red Sea and Suez Canal are rerouting after a multitude of attacks by Iran-backed Houthi militants.
Fight Against Inflation
Combined with disruptions at a drought-stricken Panama Canal in the Western Hemisphere, the rise in merchant shipping rates poses headwinds for central bankers in their inflation fight. Meantime, the economy in Vietnam exceeded expectations this year and is poised for better results in 2024. For economies in many African nations next year, credible elections and improved governance are key.
Half of the container ship fleet that regularly transits the Red Sea and Suez Canal is avoiding the route now because of the threat of attacks, according to new industry data. The tally compiled by Flexport Inc. shows 299 vessels with a combined capacity to carry 4.3 million containers have either changed course or plan to. That’s about double the number from a week ago and equates to about 18% of global capacity. Diverted voyages are more costly and may lead to higher prices for consumers on everything from sneakers to food to oil if the longer journeys persist.
Asia’s Conundrum
Vietnam’s economy fared better than expected in 2023, indicating it will keep improving as consumer demand returns, exports recover and investments surge. GDP rose 5.05% from a year earlier after increasing an initial 8.02% in the previous year. The economy is expected to return to 6% growth next year, and vie for the best-in-Asia growth tag by 2025, a Bloomberg survey shows. South Korea’s semiconductor industry recorded the largest gains in years in both production and shipments, underscoring a revival of technology momentum that bodes well for the nation’s economic outlook next year and for the global tech sector.
Conditions In Europe
Spanish inflation remained steady at the end of 2023, tempering a likely euro-zone pickup that may embolden policymakers to keep pushing against bets on imminent interest-rate cuts. Even though inflation may remain elevated in the near term, central banks in Spain, France, and Italy all project it will slow to 2% or even lower in 2025. Germany’s Bundesbank isn’t so optimistic, seeing Europe’s largest economy stuck above the target into 2026, kept higher by wages. Britain’s economy probably will avoid a recession in 2024 and strengthen in the second half of the year as consumers benefit from falling inflation and the easing of a lengthy cost-of-living crisis. In aggregate, the 52 economists surveyed by Bloomberg believe the Treasury and the Bank of England will engineer a soft landing for the economy next year, with growth of 0.3%.
Conditions In USA
Initial applications for US unemployment benefits increased in the week leading up to Christmas, while remaining at a level that is consistent with a resilient labor market. Employers expect to hire less in 2024, according to several regional Federal Reserve bank surveys, a trend that’s set to limit wage gains and cool inflation pressures. At the same time, the results don’t indicate an outright contraction in payrolls.
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Source: Economictimes
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