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Maersk’s View on Global Economy Turns Sour

FILE PHOTO: The Maersk Essen enters the port of Los Angeles en route to APM Terminals Pier 400 Los Angeles, California USA. Photo: Maersk

Maersk’s View on Global Economy Turns Sour

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November 2, 2022

By Fergal O’Brien (Bloomberg) —

One of the world’s biggest shipping companies just issued a downbeat assessment of the global economy, saying container demand will fall as much as 4% this year. For those hoping this will rapidly cool inflation, it had more bad news.

Alongside its demand downgrade, A.P. Moller-Maersk A/S said the price pressures that have come to dominate the post-pandemic economy — while easing a bit — are going to stick around for a while as elevated energy prices and labor shortages prop up costs across supply chains.

The outlook from Maersk, which moves millions of containers around the world every year, is a fresh warning for central banks that their inflation battles may be far from over. 

It comes hours before the Federal Reserve delivered a fourth jumbo interest-rate increase and reiterate that it remains steadfast in its task. The European Central Bank hiked last week at a second straight meeting, and the Bank of England is due to lift its benchmark on Thursday.

“Freight rates are coming down — that will detract from inflation — but we still have very high energy costs and we also have a very, very strong labor market in most countries,” Maersk Chief Executive Soren Skou said on Bloomberg Television. “So I’d be surprised if inflation comes down rapidly from here.”

In its earnings statement, Maersk said there are signs that bottlenecks are easing, but the squeeze from inflation that’s affecting earnings will remain throughout this quarter.

That was echoed in a monthly manufacturing survey from S&P Global published Wednesday, which said that inflation “remains stubbornly elevated despite continued evidence that supply-chain pressures are receding.”

“Businesses experienced pressure on the cost base due to inflation, which is expected to continue for a longer period,” Maersk said.

© 2022 Bloomberg L.P.

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