Inflation in transit: The freight–PPI connection

• We examine for the impact of shipping costs on the euro area PPI. • The data cover both bulk shipping (BDI) and containerships. • An economically meaningful impact exists between shipping costs and the PPI. • More pronounced for containerships than bulk (0.1 % vs 0.04 % per 1 % increase). We examine the impact of shipping costs on the euro area producer price index, accounting for both commodities that are shipped in bulk via the use of the Baltic Dry Index, and goods that are shipped in containerships via the use of the Containership Time Charter Index. The estimates, using a Vector Error Correction Model, suggest the existence of an economically meaningful impact from shipping freight rates to manufacturer producer prices, with the effect being more pronounced for containership freight rates (approximately 0.1% per 1% increase in freight rates).