Attacks in the Red Sea that have driven up shipping costs could also contribute to inflation, warns the Organisation for Economic Co-operation and Development. Rates to ship freight by sea have risen 100%, which could bring import price inflation of almost 5% among OECD member countries, it said.
The organization’s economic outlook notes this could increase overall prices by an additional 0.4 percentage points after a year.
“It’s something we’re watching closely … we have seen an increase in shipping prices, if that were to continue for for an extended period, then that would feed through into consumer price inflation,” said Clare Lombardelli, chief economist at the OECD. “But at the moment, we don’t anticipate that to be the case,” Lombardelli said.
Late last year, attacks by Houthi militants led shipping firms to begin avoiding the Suez Canal, the quickest trade route between Europe and Asia, in favor of the Cape of Good Hope around Africa. This decreases capacity as it lengthens shipping timelines by 30% to 50%.
