## How Soaring Shipping Costs Raise Prices Around the World

_IMF Blog, March 28, 2022_

## Source details

**Canonical URL:** [How Soaring Shipping Costs Raise Prices Around the World](https://www.imf.org/en/blogs/articles/2022/03/28/how-soaring-shipping-costs-raise-prices-around-the-world)

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## Bibliographic details
- Authors: Yan Carrire-Swallow, Pragyan Deb, Davide Furceri, Daniel Jimenez, Jonathan D Ostry
- Published: March 28, 2022

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### Key findings and magnitudes
- The sea carries more than 80 percent of the world’s traded goods, most transported in 40-foot-long steel containers.
- In the 18 months following March 2020, the cost of shipping a container on the world’s transoceanic trade routes increased seven-fold, while the cost of shipping bulk commodities spiked even more.
- Using data from 143 countries over the past 30 years, the analysis finds:
  - When freight rates double, inflation picks up by about 0.7 percentage point.
  - The effects are persistent, peaking after a year and lasting up to 18 months.
  - The increase in shipping costs observed in 2021 could increase inflation by about 1.5 percentage points in 2022.

### Transmission mechanisms and timing
- Pass-through to import and producer prices:
  - Higher shipping costs hit prices of imported goods at the dock within two months.
  - These higher import costs quickly pass through to producer prices, reflecting reliance on imported inputs.
- Pass-through to consumer prices:
  - The impact on consumer prices builds more gradually and hits its peak after 12 months.
  - This slower pass-through to consumers contrasts with global oil-price shocks, which drivers feel at the pump within a couple of months.
- Volatility and contribution to inflation variation:
  - While the pass-through to inflation from shipping costs is less than that from fuel or food prices (which account for a larger share of consumer purchases), shipping costs are much more volatile.
  - Consequently, the contribution in the variation of inflation due to global shipping price changes is quantitatively similar to the variation generated by shocks to global oil and food prices.

### Cross-country heterogeneity
- Structural and exposure factors that amplify inflationary effects:
  - Countries that import more of what they consume see larger increases in inflation.
  - Countries more integrated into global supply chains experience larger inflation effects.
  - Countries that typically pay higher freight costs (landlocked countries, low-income countries, and especially island states) see more inflation when shipping costs rise.
- Policy framework interaction:
  - A strong and credible monetary policy framework can mitigate second-round effects from import prices and inflation.
  - Keeping inflation expectations well-anchored is key to containing the effect of soaring shipping costs on consumer prices, particularly core measures that exclude fuel and food.

### Outlook and policy implications
- The analysis suggests the inflationary impact of shipping costs will continue to build through the end of 2022.
- Central bankers face complicated trade-offs: increasing inflation pressures from higher shipping costs amid still ample slack in economic activity.
- The war in Ukraine (noted as occurring after this analysis was prepared) is likely to cause further supply-chain disruptions, which could keep global shipping costs—and their inflationary effects—higher for longer.

*Source: IMF Blog — How Soaring Shipping Costs Raise Prices Around the World (March 28, 2022)*

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## References

- [Our new research shows](https://www.imf.org/en/Publications/WP/Issues/2022/03/25/Shipping-Costs-and-Inflation-515144)
- [https://www.imf.org/wp-content/uploads/2022/03/COTW-shipping-costs.jpg](https://www.imf.org/wp-content/uploads/2022/03/COTW-shipping-costs.jpg)

_Source: https://www.imf.org/en/blogs/articles/2022/03/28/how-soaring-shipping-costs-raise-prices-around-the-world_