WASHINGTON (Pakistan Point News / Sputnik - 11th May, 2022) The full impact of China's latest coronavirus lockdowns has yet to be factored into the global economy but will exacerbate supply-chain and inflation pressure across the world, Fitch Ratings said in an outlook published on Tuesday.
"The lockdown in Shanghai will exacerbate global supply-chain pressures and inflation concerns," the ratings agency said in its so-called Economics Dashboard outlook. "Much of this disruption, however, is yet to be reflected in hard global macro data, although China's overall exports slowed sharply in April."
Fitch Ratings noted that restrictions imposed as part of China's zero-COVID-19 policy had led to a plunge in Shanghai freight traffic volume in April and early May.
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 and add to the existing global inflationary pressures, the ratings agency said.
"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," it said. "As supply-chain disruptions persist, container freight rates could remain elevated or increase. This channel is likely to outweigh the effect of slower growth in China on global inflation through a weakening of commodity demand and prices."
The Shanghai lockdown has come at a time when there were few signs of improvement in global goods shortages, including reported rising lead times for semiconductor deliveries. The time taken to transport freight from Asia to the West coast of the United States was twice as long as it was at the start of the coronavirus pandemic, while shipping rates are six times higher than they were in early 2020, Fitch Ratings said.
Ratings said the container backlog at the Shanghai port eventually will make its way to West coast ports, likely causing congestion in the summer months, Fitch Ratings also said.
"Congestion at US West Coast ports has eased in recent months, (but) this could prove temporary," Fitch Ratings added.
With US ports struggling with staffing shortages and constraints on distribution channels, supply-chain disruptions were unlikely to be resolved rapidly, according to Fitch Ratings.
