The International Monetary Fund (IMF) has identified the significant rise in shipping costs as a key factor contributing to current global inflationary pressures. In its recent report titled “The Costs of Misreading Inflation,” the IMF highlighted that by October 2021, the cost of shipping containers via maritime freight had surged by over 600 percent compared to pre-pandemic levels, while the cost of shipping bulk commodities by sea had more than tripled. This dramatic increase in shipping costs coincided with a resurgence in manufacturing activity following prolonged COVID-19 lockdowns, which led to a substantial rise in demand for shipping intermediate inputs, such as energy and raw materials.
However, shipping capacity was severely limited due to logistical challenges and bottlenecks stemming from pandemic-related disruptions and shortages of container equipment. The report noted that ports worldwide faced labor shortages, as workers were required to self-isolate after testing positive for COVID-19. Additionally, public health restrictions hindered the ability of truck drivers and ship crews to cross borders. The report stated, “While skyrocketing food and energy prices were making headlines, the surge in shipping costs seemed to pass largely under the radar, despite its potential inflationary impact.” The analysis indicated that a doubling of shipping costs could lead to an inflation increase of approximately 0.7 percentage points. Given the actual rise in global shipping costs during 2021, the IMF estimated that the impact on inflation in 2022 exceeded 2 percentage points, a significant effect that few central banks would overlook.
The IMF’s study further revealed that the inflationary effects of the shipping cost shock are more prolonged than those of commodity price shocks, peaking after about a year and lasting up to 18 months. In contrast, the impact of global oil prices on consumer price inflation typically peaks after only two months. The report acknowledged that these average results can vary across different economies and regions, depending on monetary policy frameworks. Specifically, the effectiveness of central banks in stabilizing prices and managing expectations, along with structural factors such as geography—which influences an economy’s remoteness and reliance on goods transported by sea—play crucial roles.
The evidence presented in the report suggests that countries with less anchored inflation expectations and weaker monetary policy frameworks are likely to experience larger and more persistent impacts from rising shipping costs. Consequently, lower-income countries and certain emerging market economies may be more vulnerable compared to advanced economies that have established credentials for price stability.
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