The dramatic rise in shipping costs is to blame, according to the International Monetary Fund, for the current global inflationary pressure.
The lender stated in a new report titled “the costs of misreading inflation” that indicators of the cost of shipping containers by maritime freight had increased by over 600 percent from their pre-pandemic levels by October 2021, while the cost of shipping bulk commodities by sea had more than tripled.
The report says that as manufacturing activity picked up after long COVID-19 lockdowns, there was a lot of demand for shipping intermediate inputs (like energy and raw materials) by sea.
Along with pandemic disruptions and a lack of container equipment, logistical obstacles and bottlenecks severely restricted shipping capacity.
It also noted that truck drivers and ship crews were unable to cross borders due to restrictions on public health, and that workers were lacking in ports all over the world, forcing them to self-isolate after testing positive for COVID-19.
In part, it said, “Despite its potential inflationary impact, the surge in shipping costs appeared to pass largely under the radar, while skyrocketing food and energy prices were making headlines.” According to our analysis, inflation would rise by roughly 0.7 percentage points if shipping costs doubled.
According to the global lender’s research, the impact of a shock to shipping costs on inflation was longer-lasting than that of a shock to commodity prices, peaking approximately a year later and lasting up to 18 months.