Market watchers say they will have limited impact on Singapore’s inflation rate for now, though Singapore exporters will feel the effects. But the higher rates could make themselves more felt in the US, says OCBC chief economist. Equipment shortage, port congestion and a surge in shipment have come together to create a perfect storm, sending ocean freight rates up to highs last seen during the pandemic-and no relief is in sight for the short-term. Market watchers believe this might have little impact on Singapore’s inflation rate now unless the surge in rates stick around. But at least one economist thinks that exporters in Singapore might feel the effect of the spike in sea cargo rate actually, and that the elevated rates could also move the needle for the closely watched inflation figure in the US.
Key points:
- Equipment Shortage and Port Congestion: These factors, along with a surge in shipments, have driven ocean freight rates to pandemic-level highs.
- Limited Impact on Inflation: Market watchers believe the rate hike will have a limited effect on Singapore’s inflation unless rates remain high long-term.
- Impact on Exporters: Singaporean exporters are likely to feel the financial strain of higher shipping costs.
- Potential US Inflation Impact: Elevated rates could significantly influence inflation figures in the US, as suggested by an OCBC economist.
The Problem:
Sea cargo rates have surged to their highest point since the pandemic. This means shipping goods by sea has become significantly more expensive.
Causes:
The news mentions a “perfect storm” of factors contributing to the rise:
- Equipment shortage: Lack of essential shipping containers and equipment.
- Port congestion: Ports are overloaded with cargo, leading to delays and higher costs.
- Surge in shipments: Increased demand for shipping goods is putting a strain on the system.
Overall:
Singapore is trying to avoid a rise in consumer prices (inflation) caused by the high shipping costs. However, its export businesses face challenges due to the increased shipping expenses. The situation remains uncertain, and the long-term impact on both Singapore’s inflation and the broader global economy needs to be monitored.