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Business News/ Economy / Inflationary concerns to exacerbate due to Shanghai lockdown: Fitch Ratings
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Inflationary concerns to exacerbate due to Shanghai lockdown: Fitch Ratings

It said that that 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

India’s retail inflation accelerated to a 17-month high of 6.95% n March led by a sharper than expected spike in prices of food and manufactured goods.Premium
India’s retail inflation accelerated to a 17-month high of 6.95% n March led by a sharper than expected spike in prices of food and manufactured goods.

BENGALURU : As India faces a sharp rise in inflation, Fitch Ratings on Wednesday cautioned that the lockdown in China will exacerbate global supply-chain pressures and inflation concerns as shortages of manufactured goods could intensify. 

It said that that 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," said Fitch Ratings in its latest Economics Dashboard. 

India’s retail inflation accelerated to a 17-month high of 6.95% n March led by a sharper than expected spike in prices of food and manufactured goods. As inflation remained over Reserve Bank of India’s upper tolerance band of 6%, the monetary policy committee in an out of cycle policy review last week hiked repo rate by 40 basis points for the first time since August 2018. 

It added that as much of 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," said the global Ratings agency. This channel is likely to outweigh the effect of slower growth in China on global inflation through a weakening of commodity demand and prices, it added. 

Fitch said that much of this disruption was yet to be reflected in hard global macro data, although China’s overall exports slowed sharply in April. 

The Shanghai lockdown comes at a time when there are few signs of improvement in global goods shortages including reported rising lead times for semiconductor deliveries, it said. 

Even before the latest lockdown in China, the time taken to transport freight from Asia to the US West Coast was twice as long as it was at the start of the pandemic, while shipping rates are six times higher than they were in early 2020, it pointed out. 

 

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ABOUT THE AUTHOR
Dilasha Seth
" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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Published: 11 May 2022, 08:43 PM IST
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