Industry news
Industry news
Will inflation and rising interest rates be a problem for the freight industry?
Aug 24,2022

 

As has been the case for more than two years, the market has neither enjoyed an extraordinary boom in demand nor been plagued by any under-deployment of ships.

 

Conversely, better-than-expected but not exceptionally strong demand levels continue to outpace effective supply levels, which are under significant downward pressure due to congestion, delays and disruptions.

 

These market forces drove freight rates higher on most trade lanes, and in addition to our usual cautious focus on cost control, it was these market forces that drove the strong profitability achieved during this period.

 

Like its peers, so far in the third quarter of this year, there has been no significant increase in freight volumes despite the traditional peak period for container shipping. While retailers in the U.S. and Europe tend to stock up for Christmas during the period, inflation and an uncertain economy could act as restraints amid the ongoing Russia-Ukraine conflict.

 

There are legitimate concerns about the impact of rising inflation and interest rates on consumer spending in many major economies. Even though U.S. retailers' inventory-to-sales ratios remain low, we note that the absolute level of U.S. inventories has increased year-over-year.

 

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