Skip to content
Trending
June 30, 2025H&M shares jump as it flags summer shopping pick-up, says considering tariff price hikes June 30, 2025Bulgaria is set to join the euro zone. But its citizens aren’t convinced June 30, 2025Bank investors bet on looser regulation under Trump. They are starting to see it June 30, 2025​Here’s how the luxury real estate market is splitting up
EverydayRead
  • HOME
  • Business
  • Earnings
  • Economy
  • Finance
  • Lifestyle
EverydayRead
EverydayRead
  • HOME
  • Business
  • Earnings
  • Economy
  • Finance
  • Lifestyle
EverydayRead
  Economy  Port strike could reignite inflation, with larger economic impact dependent on how long it lasts
Economy

Port strike could reignite inflation, with larger economic impact dependent on how long it lasts

AdminAdmin—October 2, 20240

How the port strike could impact the U.S. economy

A strike hitting ports along the East and Gulf coasts could stoke prices for food, autos and a host of other consumer goods but is expected to cause only modest broader impacts — so long as it doesn’t drag on for too long.

Manufacturers of everything from trucks to toys to artificial Christmas trees face obstacles now that the International Longshoremen’s Association has called a stoppage at major Eastern container and cargo ports.

From a macro perspective, the impact will depend on duration. President Joe Biden, under powers granted by the Taft-Hartley Act, could step in and order an 80-day cooling off period that would at least temporarily halt the stoppage, though there’s little indication he will do so.

That will leave hopes in the hands of negotiators for the union and the U.S. Maritime Alliance that the strike won’t drag on and cause greater hardship for a U.S. economy heading into the critical holiday shipping season.

“Labor action by port workers along the East and Gulf coast of the United States will provide a modest hit to GDP,” said RSM’s chief economist, Joseph Brusuelas, who put the weekly impact at a bit more than 0.1 percentage point of gross domestic product and $4.3 billion in lost imports and exports.

“Given that the American economy is on a 3% growth path at this time we do not expect the strike to derail the trajectory of the domestic economy or present a risk to an early and unnecessary end to the current economic expansion,” he added.

East Coast port worker strike will hit every industry, says Moody's John Donigian

Indeed, the $29 trillion U.S. economy has dodged multiple land mines and has been in growth mode for the past two years. The Atlanta Federal Reserve is tracking third-quarter growth of 2.5%, boosted by an acceleration in net exports.

A prolonged work stoppage, though, could threaten that.

Impacted areas

Some of the main industries facing challenges include coal, energy and agricultural products. One rule of thumb is that for each strike day, it takes nearly a week to get ports operating at normal levels.

“The costs of the strike would escalate over time as backlogs of exports and imports grow,” Citigroup economist Andrew Hollenhorst said in a client note. “Perishable products like imported fresh fruit might be first to come into short supply. If the strike extends beyond a few days, shortages of certain production inputs could eventually slow production and raise prices for manufactured goods like autos.”

There are potential buffers, though, to the damage a strike could cause.

More stories

Fed survey shows lows in employment, worries about finding work and dissatisfaction with pay

August 21, 2024

Watch Fed Chair Jerome Powell deliver live remarks on policy review

May 22, 2025

U.S. job growth revised down by the most since 2009. Why this time is different

August 23, 2024

Companies brace for Tuesday: Mentions of election surge on earnings conference calls

November 3, 2024

For one, West Coast ports are expected to take on some of the freight business that would normally go to the eastern ports. Also, some companies had been anticipating the stoppage and stockpiled ahead of time.

Moreover, pressure on supply chains, exacerbated sharply during the pandemic, has largely eased and is in fact below pre-Covid levels, according to a New York Fed measure.

ILA seeks 61.5% wage increase as port workers strike for the first time in almost 50 years

“We think fears around the potential economic impacts are overdone,” wrote Bradley Saunders, North America economist at Capital Economics. “Frequent shocks to supply chains in recent years have left producers more attuned to the risks of running low inventories. It is therefore likely that firms will have taken precautionary measures in case of a strike – not least because the possibility has been touted by the ILA for months.”

Saunders added that he thinks there’s a strong possibility that the White House could step in to the fray and invoke a cooling-off period, despite the administration’s strongly pro-union leanings.

“There is little chance that the administration would risk jeopardizing its recent economic successes less than two months before a tightly-contested election,” he said.

Inflation threat

In the meantime, there are a slew of other issues that could complicate things.

Snags in the supply chain could exacerbate inflation just as it appears price pressures have cooled from their mid-2022 peak that sent the annual rate to its highest level in more than 40 years. The maritime association is proposing raises approaching 50%, another factor that could reignite inflation just as wage pressures also have receded. The union is looking for larger increases plus guarantees against automation.

“This is clearly transitory. They will have some resolution,” said Christopher Ball, economics professor at Quinnipiac University. “That being said, in the short run, if it lasts more than a few days, if it lasts more than a week … that will certainly push up the prices of a lot of those goods and services now. It could cause price spikes in the short run during the strike, and I can easily see that pushing up prices of certain goods a lot.”

Ball expects the main areas to be impacted will be food and vehicles, both of which have exerted either disinflationary or deflationary pressures in recent months. Small businesses near the ports also could feel adverse impacts, he added.

“If it goes a week or two, you’re running into businesses that have real shortages and, yeah, they’ll absolutely have to raise those prices just to prevent broad shortages of those goods,” Ball said.

That all comes at an inopportune time for the Federal Reserve. The central bank last month cut its benchmark borrowing rate by half a percentage point and indicated more trimming is to come as it gains confidence that inflation is easing.

However, the strike could complicate decision-making. The October jobs report, which is the last one the Fed will see before its Nov. 6-7 policy meeting, will be influenced both by strike-impacted layoffs as well as those from Hurricane Helene.

It coincides with a looming presidential election on Nov. 5, and the economy as a pivotal issue.

“This would just completely complicate everything that the Fed is trying to do because they’re not getting a read to what the economy is actually performing,” Jim Bianco, head of Bianco Research, told CNBC.

Fed Chair Jerome Powell on Monday said he expects the central bank to lower rates by another half percentage point by the end of the year, somewhat slower than markets had been anticipating.

Correction: The International Longshoremen’s Association has called a stoppage at major Eastern container and cargo ports. An earlier version misstated the name of the organization.

Don’t miss these insights from CNBC PRO

Gap beats earnings and revenue estimates, hikes profit margin outlook as results are posted early
With Hurricane Helene disrupting travel, here’s what fliers need to know
Related posts
  • Related posts
  • More from author
Economy

Bulgaria is set to join the euro zone. But its citizens aren’t convinced

June 30, 20250
Economy

Core inflation rate rose to 2.7% in May, more than expected, Fed’s preferred gauge shows

June 28, 20250
Economy

World Bank sharply cuts global growth outlook on trade turbulence

June 26, 20250
Load more
Read also
Finance

Bank investors bet on looser regulation under Trump. They are starting to see it

June 30, 20250
Economy

Bulgaria is set to join the euro zone. But its citizens aren’t convinced

June 30, 20250
Earnings

H&M shares jump as it flags summer shopping pick-up, says considering tariff price hikes

June 30, 20250
Business

​Here’s how the luxury real estate market is splitting up

June 30, 20250
Business

Hemi V-8 engines and mechanical bull rides: Inside Stellantis’ plan to revive its Ram Trucks brand after yearslong sales declines

June 29, 20250
Finance

3 forces driving a record week for stocks as 7 portfolio names hit new highs

June 28, 20250
Load more
© 2023, All Rights Reserved.
  • About Us
  • Advertise With Us
  • Contact Us
  • Disclaimer
  • Cookie Law
  • Privacy Policy
  • Terms & Conditions