Sky-high freight rates will add 1.5% to global inflation this year

The International Monetary Fund (IMF) has studied container freight rates and statistics to calculate the impact of today's high shipping costs on global inflation.

In a new blog post on the IMF website entitled "How soaring transport costs are raising global commodity prices", IMF economists note that the cost of shipping containers on the world's transoceanic trade routes has increased sevenfold in the 18 months since March 2020.

The analysis predates the Russia-Ukraine conflict, but is not isolated from IMF officials suggesting that the conflict could increase global inflation.

The IMF looked at data from 143 countries over the last 30 years and found that shipping costs are a significant driver of global inflation: when freight rates double, inflation rises by about 0.7%.

Importantly, the effect is long-lasting, peaking after one year and lasting up to 18 months.

The IMF says: "This means that the rise in transport costs observed in 2021 could lead to an increase in inflation of about 1.5 percentage points in 2022." The IMF study was published at a time when regulators and politicians, particularly in the US, are looking to take action to rein in liner pricing.

Meanwhile, many analysts are questioning whether the boom in the container market has really stabilised, as all the major container indices have fallen back this month, while economists say the slowdown in Western consumer demand is in large part down to soaring inflation caused by high shipping costs.