KUALA LUMPUR (April 2): Supply-chain bottlenecks in global shipping and semiconductor markets are adding to near-term pressures on inflation, said Fitch Ratings.
In its Economics Dashboard report released yesterday, the rating agency said the latest development amplified the impact of higher commodity prices and base effects from price falls in spring last year.
It said global manufacturing demand is recovering strongly, reflecting buoyant demand for electronics and other durable goods from homebound consumers, surprisingly resilient private-sector investment in the US and a recovery in China.
Fitch explained that world trade had recovered more rapidly than expected and, in combination with dislocations in the container shipping sector as a result of the Covid-19 pandemic, shipping freight costs had soared since November.
It said container ship charter rates had increased fourfold on some routes, highlighting that the recent temporary closure of the Suez Canal intensified the bottlenecks.
Fitch said the global semiconductor industry is also struggling to meet rapidly expanding demand. Supply delays have reached record levels, according to some business surveys.
“We expect these supply bottlenecks to ease in 2H21 (the second half of 2021). Underlying inflation rates in the services sectors and wage growth remain low in the US and Europe.
“Nevertheless, near-term upward pressures on prices are significant and growing.
“Balance-of-payments data show the cost of shipping freight transportation services was US$32 billion (RM132.43 billion) in the US in 2020 (0.2% of gross domestic product or GDP) and €51 billion in the European Union (EU) in 2019 (0.4% of GDP)," Fitch added.