‘Supply bottlenecks to ease in H2’

KUALA LUMPUR: Supply chain bottlenecks in global shipping and semiconductor markets are adding to near-term pressures on inflation, said Fitch Ratings.

The rating agency, in its latest Economics Dashboard, said this had amplified the impact of higher commodity prices and base effects from price falls early last year.

“We expect these supply bottlenecks to ease in the second half of this year. Underlying inflation rates in the services sectors and wage growth remain low in the United States and Europe.”

However, near-term upward pressures on prices were significant and growing, it added.

Fitch said the balance-of-payments data had shown the cost of shipping freight transportation services were US$32 billion in the US last year (0.2 per cent of gross domestic product) and 51 billion euro in the €27 in 2019 (0.4).

Global manufacturing demand, the firm said, was recovering strongly, reflecting buoyant demand for electronics and other durable goods from homebound consumers, surprisingly resilient private-sector investment in the US, and the recovery in China.

Fitch said the world trade had recovered more rapidly than expected and in combination with dislocations in the container shipping sector as a result of the pandemic, shipping freight costs had soared since November.

Container ship charter rates have increased fourfold on some routes.

The recent temporary closure of the Suez Canal had also intensified bottlenecks, it said.

BLOOMBERG PIC Tug boats pulling the ‘Ever Given’ container ship along the Suez Canal after being freed from the canal bank in Egypt on Monday. Fitch Ratings says the recent temporary closure of the Suez Canal has intensified global supply bottlenecks.