Supply chain bottlenecks in global shipping and semiconductor markets are adding to near-term pressures on inflation, says Fitch Ratings in a new report published Thursday.
With global manufacturing demand is recovering strongly, reflecting buoyant demand for electronics and other durable goods from homebound consumers, surprisingly resilient private-sector investment in the US, and the recovery in China, according to the credit ratings agency.
Fitch says world trade has recovered more rapidly than expected and, in combination with “dislocations” in the container shipping sector as a result of the pandemic, shipping freight costs have soared since November. On some routes, container ship charter rates have increased fourfold, and the recent temporary closure of the Suez Canal has intensified bottlenecks. Meanwhile, the global semiconductor industries are also struggling to meet rapidly expanding 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, near-term upward pressures on prices are significant and growing. Balance-of-payments data show the cost of shipping freight transportation services were USD32 billion in the US in 2020 (0.2% of GDP) and EUR51 billion in the EU27 in 2019 (0.4%),” said Fitch.
The report, titled “Economics Dashboard: Ships, Chips, and Inflation Blips”, is available on the the Fitch Ratings website.
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