Supply chains around the world are recovering, which means pressures on commodity prices may ease, according to a report by the agency.bloomberg“.
Freight rates between China and the West Coast of the United States have fallen to pre-pandemic levels, following COVID-19 restrictions raised shipping costs 15-fold.
In the US, consumer inflation data earlier this month showed that goods – excluding food and energy – rose 1.4 percent from a year earlier.
According to “Bloomberg”, this rate would give Federal Reserve officials some comfort in tightening their policy to curb inflation, as they target an annual rate of no more than 2 percent.
US retailers highlighted a significant improvement in logistical pressures, although the pain of higher prices for consumers is far from over.
“While the supply chain issues have largely eased, prices are still high and there is significant pressure on the consumer,” Wal-Mart’s chief financial officer, John David Rainey, said on a conference call on Tuesday.
Short-term rates for shipping containers from Europe to the US East Coast are still more than double what they were in late 2019, according to data from Freightos.
Moreover, an estimated 70 percent of cargo transported by sea is on long-term contracts, as renegotiations were made to reformulate contracts and raise prices in 2021 and 2022.
Major retailers and manufacturers may not see enough shipping rate cuts just yet to justify further price cuts to the consumer, at least in the first quarter of 2023.
This is partly because companies are reluctant to change their prices more than twice a year, according to Chris Rogers, head of supply chain research at analytics firm S&P Global Market Intelligence.
“While core prices are going down, it can take a long time to feed into that,” Rogers said. “We’re still seeing some effects of inflation hitting product prices now.”
In turn, Bath and Body Works CEO Gina Boswell said she sees continued price headwinds for the time being, although that may change later in 2023.
“We expect to continue to see inflationary pressures on our input costs in the first quarter, before we start to see some relief through the year,” she said on a conference call last week.
