Global Recession Indicator — Or Return To Pre-COVID-19 Demand? Shipping Rates Fall To Near-Pandemic Onset Levels

Consumers had to rethink the way they shopped as a result of COVID-19 lockdowns and the resulting social isolation. Many reconfigured their priorities as well as spent more time online, including shopping, than ever before.

Retailers worldwide were forced to restrict the number of purchases of high-demand items such as hand sanitizer and toilet paper after panic buying took hold.

Public health laws, including prolonged lockdowns, prevented the cross-border movement of ships and truck workers, disrupting supply lines from Shanghai to Rotterdam to Los Angeles.

Along with creating delays, the cost of delivering items to consumers increased.

These difficulties led to a seven-fold increase in the price of shipping a container on the world's transoceanic trade routes in the 18 months after the pandemic began, and an even greater increase in the price of shipping bulk commodities.

Those costs are coming down — and revisiting levels seen prior to the pandemic.

Read Also: China Surprises With Exports Data: What's Triggering A Slowdown Despite Weak Yuan?

This is alarming some analysts as according to S&P Global Market Intelligence, while freight costs have decreased as a result of the easing of supply chain disruptions brought on by the pandemic, a large portion of the slowdown in container and vessel demand was caused by slower cargo transportation.

“Much reduced port congestion level, along with weaker cargo arrivals, was one of the major reasons behind the significant decrease in freight rates,” S&P said in a note on Wednesday.

The Baltic Dry Index — a measure of the cost of shipping large quantities of raw materials by sea — is predicted to drop 20% to 30% this year before slightly rising in 2024, underscoring the growing dangers of a global recession as consumer demand declines in the face of rising living expenses and inflation.

The World Trade Organization (WTO) said that stagnant global trade growth is a significant indicator of a slowdown in the global economy; yet, its August report revealed the volume of global merchandise trade has plateaued.

The first quarter of 2022 saw a year-over-year growth decline to 3.2% from 5.7% in the final quarter of 2021, according to the WTO, which blamed the slowdown in part on Russia's invasion of Ukraine and China's protracted lockdowns.

Photo: Aun Photographer via Shutterstock