An ICYMI from Fitch rating agency overnight, with comments that will take no one by surprise.
- The lockdown in Shanghai will exacerbate global supply-chain pressures and inflation concerns
- Restrictions imposed as part of China’s zero-Covid-19 policy have led to a plunge in Shanghai freight traffic volume in April and early May. With fewer trucks operating and Shanghai’s port staff unable to load and unload ships at their usual pace, significant backlogs have built up at the Port of Shanghai.
- Much of this disruption, however, is yet to be reflected in hard global macro data
- As supply-chain disruptions persist, container freight rates could remain elevated or increase. With Shanghai handling around a fifth of China’s port volume and China accounting for 15% of world merchandise exports, shortages of manufactured goods could intensify, adding to existing global inflationary pressures. This channel is likely to outweigh the effect of slower growth in China on global inflation through a weakening of commodity demand and prices.