Upply - Market insights

Inflation and supply chain tensions threaten recovery

Written by David Thébault | October 29 2021

The world economy has confirmed that it is in a V-shaped recovery process, which is supporting global trade. This situation is feeding inflationary tensions, including in the transport and logistics sector.

The world economy has confirmed that it is in a V-shaped recovery process.  The 3.2% drop in GDP in 2020 is being absorbed quarter by quarter. The International Monetary Fund (IMF) expects the world economy to grow 5.9% this year and 4.9% in 2022 but with some regional disparities.

The massive economic support plans set in action in the United States, Europe and Asia have enabled consumption to return to pre-pandemic levels, thus stimulating world trade. The World Trade Organisation (WTO) has revised its forecast upwards. It now expects the volume of world trade in goods to increase 10% in 2021 after having fallen 5.3% in 2020.

Soaring prices

On the other hand, this wide-ranging recovery has resulted in an increase in inflationary tensions, since supply is not keeping up with the sharp increase in demand. We are seeing prices soar for energy, commodities and key industrial components like semi-conductors.

This situation is also feeding inflationary tensions in the transport and logistics sector, which are adding to those already affecting energy and commodities. In a report entitled "Keeping the recovery on track", which was published on 21 September, the OCDE estimated that the increase in commodity prices and shipping costs worldwide is adding about 1.5 percentage points to the annual increase in consumer prices in the G20 countries.

The situation looks set to remain tense for several quarters, since there is no sign at this stage of any real improvement in supply shortfalls, congestion or inflation. The disruption is such that, according to the IMF, it could affect the outlook for world growth.

CONTENTS

  1. Container shipping heads for new, high-price normal
  2. Air freight market stabilises
  3. Strong economic recovery
  4. General inflationary trend

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