Sky-high shipping costs could keep prices surging until mid-2023
Shippingprices are still very high, signaling inflationis far from cooling down.
- It usually takes 12 to 18 months for high container costs to reach consumer prices, The New York Times reported.
Tangled supply chains started to worsen US inflation in 2021, but the problem probably won't die down for at least another year.
"The goods that are being affected by shipping costs today are really the goods that consumers and American households are going to be buying many months from now, and that's why those costs tend to show up later," Sly told The Times.
That imbalance worsened as firms rushed to shore up inventory. Complex global supply chains weren't able to rebound as quickly as demand, and issues ranging from shipping delays to materials bottlenecks quickly ensnared the logistics industry.
The supply-chain issues "have been larger and longer lasting than anticipated," Federal Reserve Chair Jerome Powell said Wednesday, adding the pressures have played a major role in keeping inflation at four-decade highs.
The latest signs suggest the shipping crisis could boost inflation for even longer than Sly's estimate. The Freightos Baltic Index — a measure of global shipping prices — sat at $9,488 on March 18, meaning it cost nearly $10,000 on average to ship a 40-foot freight container. That's almost seven times higher than the March 2020 reading of $1,400. While that's down from the highs seen in the fall of 2021, it's still holding at extremely high levels.
The last few weeks brought new risks to the outlook. Russia's invasion of Ukraine has driven prices for energy commodities like oil and natural gas even higher. That can quickly lead to pricier shipping as truckers and freighters are forced to pay even more for fuel.
Soaring infections in China could also worsen the supply chain's recovery. The Chinese government reinstated some lockdown measures in recent weeks to stem the coronavirus's spread. Should the situation worsen, it's possible the country will have to shut its factories once again and throw the global
The Fed which is tasked with cooling off US inflation, is still optimistic that the price surge will slow later in the year. Officials expect inflation to start easing in the second half of 2022, Powell said in a Wednesday press conference. Policymakers' updated projections also see inflation improving into 2023, albeit at a slower pace than they forecasted in December.
If that cooldown is to come, shipping prices will be among the first indicators to show it. Yet costs have plateaued after only falling slightly, signaling Americans will have to keep footing a bigger bill for many more months.
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