Crate Expectations

Image source: Sichon, hacohob - Shutterstock

What's going on?

Data out on Monday showed that the cost of flying cargo around the world has reached record highs, as the world’s economies try to get their fragile economies where they need to be.

What does this mean?

Supply chains are always messy in the run-up to Christmas, but this year’s come with an added wrinkle: a shipping container shortage has been forcing companies to transport their products by air rather than sea. That’s problematic because passenger planes transport half of all air cargo, and many of them are  – for obvious reasons – still grounded. And while logistics companies like FedEx and DHL are trying to pick up the slack, it’s not enough: the amount of air cargo that can be transported is 13% lower than it was at the same time in 2019. So it stands to reason that costs are literally sky-high, with prices on key routes between China and the US and Europe having nearly doubled in the last three months (tweet this).

Why should I care?

The bigger picture: Danged if they do…
The world’s biggest central banks are set to meet this week to discuss how to tackle spiking inflation, and this data will only compound their worries. But Omicron’s put them in a Catch-22: anything they do to slow down rising prices also risks disrupting their countries’ economic recoveries – not ideal at a time when lockdowns are back on the cards.

Zooming out: Turkey chances its arm.
Turkey’s arguably a good example of what not to do: the country’s prices were an eye-watering 21% higher in November than the same time last year, largely because its central bank has recently taken the left-field approach of cutting interest rates. That’s made it cheaper for companies and people to borrow money, encouraging them to spend and pushing prices even higher. Batten down the hatches: economists are expecting the country’s central bank to cut rates even lower this week.

Originally posted as part of the Finimize daily email.

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