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Bottlenecks in shipping channels put the specter of inflation back in global economic focus

The Economist said in a recent report that there are growing concerns about a possible return inflation It rose due to operational disruptions in the Suez and Panama Canals.

The newspaper stated that under normal circumstances, its carrier channels suez canal Panama accounts for approximately 10% and 5% of global maritime trade respectively. However, due to low water levels, the Panama Canal Authority recently imposed limits on the number of ships allowed to transit. Additionally, rising tensions have forced… Bab el Mandeb StraitSome ships traveling between Europe and Asia must take the longer route around Africa, a key passageway from the Indian Ocean to the Suez Canal.

This is related to Shen USA Today, Saturday, new attacks were carried out against Ansar Allah targets (Houthis) 24 hours later, joint attacks with the British on multiple locations Yemen.

The attacks were in response to Houthi attacks on Israeli ships or ships linked to Israel. Red Sea After Israel launches war Gaza, This has caused damage to the Israeli economy, with shipping prices rising and international shipping companies suspending flights.

The newspaper called these disruptions actual bottlenecks in global supply chains and likened them to blockages on these vital trade routes.

High transportation prices and their relationship to inflation

The newspaper stressed that the turmoil is particularly worrying for policymakers at a time when rich countries appear to be overcoming inflation.

She pointed out that the increase in shipping prices from mid-2020 to early 2022 coincided with the initial rise in this wave of inflation, and the subsequent decline also coincided with its decline.

However, freight rates have risen sharply again since the Houthis began launching attacks on Israeli or Israeli-linked ships following Israel's invasion of Gaza in November.

Citing data from leading international shipping price index Freitos Baltic, the cost of transporting a standard container rose by 93% last week (January 9).

Drury Consulting also noted that shipping costs from Shanghai to Rotterdam, a route that normally passes through the Suez Canal, increased by 114% during the same period.

U.S. and British warplanes and warships launch air strikes against Houthi rebels in Yemen (Reuters)

Despite these increases, the report suggests that inflation is unlikely to repeat as seen during the COVID-19 pandemic, as the current level of shipping disruption is not the same as before, with the above index reading being a quarter of its peak in 2022.

In September 2021, participants in a purchasing manager opinion survey conducted by S&P Global Ratings said transportation costs contributed 17 times more to price increases than the long-term average, the newspaper reported.

In the same agency's latest survey, purchasing managers responded that the likelihood was only three times higher than the long-term average.

S&P's Chris Rogers noted that future surveys may reveal more concerns because annual freight contracts are typically agreed in March and current rates may not accurately reflect true shipping costs.


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