Two in every five companies had to increase prices due to cost pressures - Central Bank report

Firms are still experiencing disruptions throughout their supply chain due to COVID-19 and shipping shortages, Central Bank of Malta report finds

Cost pressures have forced companies to increase prices
Cost pressures have forced companies to increase prices

Cost pressures remained elevated during the third quarter of 2021, with two in every five firms reporting an increase in selling prices to help ease the pressure.

The results come from the Central Bank of Malta’s Business Dialogue Publication, which is based on information gathered between July and September 2021.

The report indicates that a significant number of firms are still experiencing supply chain disruptions. Some firms in niche sectors reported a slight easing of pressures, but most affected firms reported continued or intensified disruptions.

Firms are especially concerned about delivery delays resulting from imports and shipping shortages, as well as a rise in global transportation costs.

In fact, this has become a key concern for all importing firms, especially those importing products from outside Europe.

MaltaToday previously reported how congested ports around the world have created bottlenecks that are hitting Maltese importers and exporters hard.

One businessman said that freight costs from the far east increased by around 300% over the past year.

The bank stated that the higher transport prices reflect the international container shortage, low competition in the global shipping market, COVID-19 port restrictions and a reduction in available sea and air routes to Malta.

For firms operating in the manufacturing and trade sectors, delays and shortages have led to disruptions in activity and losses in revenue. A particular issue for both sectors in the international shortage of microchips.

In the trade sector, several firms told the bank that Brexit is a source of disruption, causing delays, cost increases, and increased bureaucracy.

Firms are also grappling with increased production costs, with 64% of firms reporting an increase in input prices.

This is slightly below the 68% reported in the previous exercise.

Meanwhile, only 2% of firms reported a drop in input prices, from zero in the previous quarter. The remaining 34% reported stable prices.

On a sectoral level the absolute majority of firms in the construction, manufacturing, and wholesale and retail sector reported a rise in input costs. Half of services firms also reported increased material costs.