'The inflationary pressure is real!'
JMEA president bemoans spike in logistic costsWednesday, July 21, 2021
BY ABBION ROBINSON
Jamaican firms could find themselves with difficulties achieving projected bottom lines amid higher costs for raw materials as well as an upsurge in logistic costs, due to supplier shortages and transportation delays that are spreading from ports to inland hubs.
The network imbalance, the result of widespread supply chain disruption and dislocation rooted in the novel coronavirus pandemic, encompasses high unemployment, the loss of suppliers and customers, and skyrocketing online consumer goods sales amid an uneven recovery.
Just in May, the US saw its biggest surge in inflation in more than a decade with headline consumer prices increasing by five per cent year over year as consumer spending and tight capacity drove up prices in its already jammed domestic freight market.
Outgoing president of the Jamaica Manufacturers and Exporters Association (JMEA) Richard Pandohie indicated that US inland truck transportation costs has increased by 35-40 per cent since the start of the year, due to fuel increases and a shortage of truck drivers.
He told the Jamaica Observer that US trucking companies are scrambling to hire more drivers.
“Because the ocean freight has gone up so much, the trucking demand in the US has gone up but there is a shortage of drivers so the rate has jumped big time. According to one trucking company, they had to pay sign-on bonus of US $10,000 and a base pay of US $90,000 just to attract drivers,” he said, noting that logistic costs are likely to continue for the foreseeable future.
“…It's summer, economies are reopening, people will soon start buying their Christmas supplies and will even buy earlier because of the supply chain interruption, as well as buying more raw material because you just don't know when you're going to get it. It's like when you go to the supermarket and you want something but you can't get it so when you do see it you just grab all that you can,” Pandohie said.
He further pointed out that the average manufacturer in Jamaica imports more than 85 per cent of their raw materials.
“Paper cost has increased affecting cardboard prices, gas prices increase which is affecting transportation… everything has gone up, I have never seen it like this. That is the reality that we're facing. The inflationary pressure is real!” Pandohie told the Business Observer.
Despite the Bank of Jamaica's assurance that the rate of increase in prices should moderate as supply chains normalise, Pandohie argued that the Government could curb increasing taxes to ease the pressure.
“There are duties or taxes related to everything that is imported and part of it is paid in the freight rate. Now the freight rate has gone up so much so the applicable duty has gone up the in the same amount,” he explained.
“[Government] is making more revenue than it did before on the back of something that it has no control over. Same thing with the gas taxes and prices, a huge part of that end price that you pay at the pump are taxes that are a big source of revenue for the Government. I don't expect them to change that much but to moderate some of it to make sure that we can ride through this because everybody has to do their part to make sure the prices go down. It has reach to a point where it's just unaffordable to the consumers,” he contended.
He added, “In a country where so many have suffered and have lost jobs and so many of our people are at the lowest end of the pay scale… the risk for them is real. And I really hope the Jamaican dollar starts to find its way in another direction sooner or later”.
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