A recent news article published in the Splash 247 deals with the sky-high box freight rates could increase global inflation by 1.5% this year.
Role of IMF
The International Monetary Fund (IMF) has looked at container freight rates and crunched the numbers to work out what today’s sky-high shipping costs are doing to global inflation.
In the latest blog post on the IMF site entitled How Soaring Shipping Costs Raise Prices Around the World, IMF economists note the cost of shipping a container on the world’s transoceanic trade routes has increased seven-fold in the 18 months following March 2020.
The analysis predates the war in Ukraine but isn’t isolated from it with IMF officials suggesting the conflict will likely exacerbate global inflation.
When freight rates double, inflation picks up by about 0.7%
Data from 143 countries
Studying data from 143 countries over the past 30 years, the IMF found that shipping costs are an important driver of inflation around the world: when freight rates double, inflation picks up by about 0.7%.
Importantly, the effects are persistent, peaking after a year and lasting up to 18 months.
Increase in shipping cost observed in 2021
“This implies that the increase in shipping costs observed in 2021 could increase inflation by about 1.5 percentage points in 2022,” the IMF stated.
The IMF study has been published at a time where regulators and politicians, especially in the US, are looking to take action to rein in liner pricing.
It has also come out at a time where many analysts are questioning if the container boom has in fact plateaued with all the major box indices in retreat this month and economists suggesting western consumer demand has eased in no small part thanks to the soaring inflation brought about partially by high shipping costs.
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