Freight costs for consumer goods will increase significantly

Clarkson research statistics show that freight costs for consumer goods have increased significantly, but they are still not as high as during the pandemic.

The reason for this is that, for most goods, sea freight costs account for a smaller proportion of the price of the consumer goods themselves. For example, the cost of shipping a pair of shoes from Asia to Europe was about $0.19 in November last year, increased to $0.76 in mid-January 2024, and fell back to $0.66 in mid-February. By comparison, at the peak of the epidemic in early 2022, costs could top out at more than $1.90.

According to an assessment given by Oxford Economics, the average retail value of a container is about $300,000, and the cost of shipping a container from Asia to Europe has risen by about $4,000 since the beginning of December 2023, suggesting that the average price of goods inside the container would rise by 1.3% if the full cost were passed on.

In the UK, for example, 24 per cent of imports come from Asia and imports account for about 30 per cent of the consumer price index, meaning that the direct increase in inflation will be less than 0.2 per cent.

Mr Saunders said the adverse shocks to supply chains caused by sharp price rises in food, energy and globally traded goods were diminishing. However, the Red Sea crisis and the associated sharp rise in shipping costs are creating a new supply shock that, if sustained, could add fresh upward pressure to inflation later this year.

Over the past three years, inflation rates have risen sharply in many countries for a number of reasons, and inflation volatility has increased significantly. "Recently, these adverse shocks have begun to abate and inflation has fallen rapidly. But the Red Sea crisis has the potential to create a new supply shock." "He said.

He predicted that if inflation were more volatile and expectations more responsive to actual price movements, central banks would be more likely to have to tighten monetary policy in response to an increase in inflation, even if it was caused by a temporary shock, in order to re-stabilize expectations.