Prolonged shipping disruptions raise inflation risk: Nomura

Year to date, freight costs have already risen by 97% YoY.

Prolonged disruptions arising from the Red Sea crisis could push freight costs even higher, putting pressure on inflation, according to Nomura. 

In a note, Nomura economists Euben Paracuelles and Charnon Boonnuch said that a prolonged and widespread disruption could result in higher freight costs amid rising global trade.

The city-state may also experience export front-loading ahead of US tariff increases on Chinese goods in August, they said. 

“In Singapore, inflation pressures could intensify via indirect effects from supply chain disruptions, as we saw in 2021, adding to our view of sticky core inflation,” they added.

Attacks in the Red Sea earlier this year drove container ships to re-route from the Suez Canal to longer alternative routes, causing freight costs to spike by 97% YoY year to date.

PSA Singapore, the city-state’s operator of the world’s largest transshipment hub, had warned that disruptions could persist for a prolonged period.