Economic bottlenecks. Experts publish disturbing analysis

“The Microsoft failure affected the functioning of institutions and systems around the world. Such a current example from the macro world of the impact of individual events on others with a much larger scope can be the rising prices of freight,” Pekao analysts note. Let us recall that a few days ago there was a global IT failure related to Microsoft systems. It caused a number of difficulties around the world, hitting various sectors: mainly aviation, railways, media and banks.

Sea transport is becoming more and more expensive

In contrast to this failure, maritime transport has been suffering for a long time and is rebounding stronger every month around the world. Since the beginning of the year, freight prices have already increased by 120%. Today’s average container price is already almost 60% of the peak price in September 2021. “All this is happening while the chaos related to port congestion and lack of available capacity during the pandemic is still fresh in the minds of shippers,” Pekao analysts point out in their analysis.

Sea transport is becoming more expensive for several reasons. The main reason is the attacks by Houthi rebels from Yemen, which have led to the blockade of the route through the Red Sea and the Suez Canal, the shortest route between the Far East and Europe. Trade has therefore been redirected around Africa and the Cape of Good Hope. In addition, restrictions have been introduced in the Panama Canal due to low water levels. “On the other routes, where there are no such ‘bottlenecks’, there is no significant price reaction,” notes Pekao.

This has forced, among other things, an increase in transport costs, redirects creating congestion at ports and delays in deliveries, and an increase in the import of goods for stockpiles out of fear of further capacity constraints.

How does the maritime situation affect Poland?

Although it may seem that this is a situation from distant seas, which has no impact on our country, such an approach is very wrong. “Polish entrepreneurs have recently been taking advantage of deflation of producer prices, compensating for the persistent strong wage pressure. Such a large increase in freight prices will naturally increase costs, which we will see in increased inflationary pressure, especially for goods with a large share of intercontinental imports” – describe Pekao analysts.

However, pessimism is tempered. “Cyclical factors (currently moderate demand) may be easing upward pressure on prices, and some of the shipping costs may be absorbed by margin cuts. Moreover, the current increase in freight costs is not occurring at the same time as the widespread factory closures and demand spikes that contributed to the inflation spike in the wake of the pandemic. This suggests less cost pressure from this source in today’s environment,” they write further.

According to Pekao’s calculations, if the freight situation does not change dramatically in 2024, core inflation in Poland will be higher by 0.3 percentage points in the coming quarters. The hope for a quick return to normal is the continuing surplus of container ships.