Surge In Shipping Cost Leading To Global Inflation Says IMF

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The International Monetary Fund has attributed the current global inflationary pressure to the dramatic increase in shipping costs.

New Report

In a new report titled “the costs of misreading inflation,” the lender said that by October 2021, indicators of the cost of shipping containers by maritime freight had increased by over 600 per cent from their pre-pandemic levels, while the cost of shipping bulk commodities by sea had more than tripled.

According to the report, as manufacturing activity picked up following extended COVID-19 lockdowns, demand for shipping intermediate inputs (such as energy and raw materials) by sea increased significantly. At the same time, shipping capacity was severely constrained by logistical hurdles and bottlenecks related to pandemic disruptions and shortages of container equipment.

Lacking Workforce

It further noted that ports around the world lacked workers, who had to self-isolate after testing positive for COVID-19, and public health restrictions prevented truck drivers and ship crews from crossing borders. It read partly, “While skyrocketing food and energy prices were making headlines, the surge in shipping costs seemed to pass largely under the radar, despite its potential inflationary impact. Our analysis suggests that a doubling of shipping costs causes inflation to increase by roughly 0.7 percentage points…”

The global lender said its study showed that the effect of the shipping cost shock on inflation was longer-lasting than the effects of commodity price shocks, peaking after about a year and lasting up to 18 months. “Our evidence suggests that the impacts of surging shipping costs are likely to be larger and more persistent in countries with less-anchored inflation expectations and weaker monetary policy frameworks…”

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Source: Punchng


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