X

This is not a paywall.

Register for free to continue reading.

We made a promise to you that we’ll never erect a paywall and we intend to keep that promise. We also want to continually improve your reading experience and you can help us do that by registering with us. It’s quick, easy and will cost you nothing.



Nearly there! Create a password to finish up registering with us:


Please enter your password or get a login link if you’ve forgotten


Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Surging shipping costs will fuel global inflation - IMF

DM168

FREIGHT RATES

Surging shipping costs will fuel global inflation in 2022 – IMF

A drone image shows shipping containers near the Seagirt Marine Terminal, Port of Baltimore, Maryland, US, on 18 October 2021. (Photo: EPA-EFE / Jim Lo Scalzo)

Trade on the world’s oceans is a major factor in the ups and downs of inflation. Covid-19 saw shipping costs shoot up and the war in Europe will make things worse.

Surging shipping costs will continue to fuel global inflation in 2022, a new study by the International Monetary Fund (IMF) has found. More than 80% of the world’s traded goods move across the ocean. There is no way to do without shipping and so its costs have to be absorbed across supply and production chains.

“The Covid-19 pandemic has disrupted global supply chains, leading to shipment delays and soaring shipping costs. We study the impact of shocks to global shipping costs — measured by the Baltic Dry Index (BDI) — on domestic prices for a large panel of countries during the period 1992-2021. We find that spikes in the BDI are followed by sizable and statistically significant increases in import prices, PPI [Producer Price Index], headline and core inflation, as well as inflation expectations,” the study found.

“The impact is similar in magnitude but more persistent than for shocks to global oil and food prices.”

Shipping costs in the first 18 months of the Covid-19 pandemic surged sevenfold, the IMF said, which means the global economy needs to brace itself for significant inflationary pressures. And the study was conducted before the war in Ukraine, which will exacerbate the situation.

“The results, based on a sample of 46 countries from February 1992 to December 2021, suggest that increases in global shipping costs have a non-negligible, persistent and statistically significant effect on domestic inflation,” the study said.

A doubling of freight rates basically sees inflation accelerate by 0.7 percentage points. But some countries are more vulnerable than others to the aftershocks and second-round effects. These include land-locked countries, low-income countries and island states.

“The effects are more muted in countries where imports make up a smaller share of domestic consumption, and those with inflation-targeting regimes and better anchored inflation expectations,” the study said.  

South Africa imports a lot of products for consumption and oil imports are currently a key driver of domestic inflation. But the central bank is a disciplined inflation targeter — with a 3% to 6% target range — and this helps to anchor inflation expectations. Consumer inflation is currently running at 5.7% in South Africa and the combination of shipping costs and surging oil and food prices is going to keep inflation bubbling for some time. At least the central bank stands ready to contain such pressures as it embarks on a tightening cycle in line with its peers.

After years of ultralow and even negative interest rates and scant inflation, the global economy appears to be abandoning the “new normal” in favour of the “old normal” of higher rates and faster inflation. A lot of that stems from shipping costs. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

No Comments, yet

Please peer review 3 community comments before your comment can be posted