Price Trends
By Elizabeth Baatz -- Logistics Management, 1/1/2004
Source: Elizabeth Baatz, Thinking Cap Solutions. E-mail: ebaatz@ice-alert.com
Trucking
Trucking prices shifted into slightly higher gear in November. Average prices increased only 0.2% from the prior month and 2.4% from the same month a year earlier. But that aggregate figure hides a noteworthy trend: It now appears that truckload prices are rising after years of flat or declining numbers. Average prices for TL services in November increased 0.5% from October and 2.9% from November 2002. For the final quarter of 2003, those prices could be up 3.1% compared to a year earlier. That would be the largest year-on-year price hike in this industry segment since early 1995. The outlook for our aggregate trucking index calls for a 3.5% price hike in 2004.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Less-than-truckload | +1.1 | +3.7 | +2.2 |
| Truckload | +0.5 | +1.6 | +2.9 |
| General freight - local | +0.2 | +1.6 | +2.7 |
Air
Average prices for shipping on domestic airlines' scheduled and chartered flights grew just 0.2% from October to November 2003. The outlook for 2004 doesn't appear quite as sedate as those numbers might suggest. The inflation trend for our air cargo and parcel index will stall in Q2:2004 at a 2.6% increase over year-earlier prices, but will lift off with a 6.3% price hike in the fourth quarter. This return to inflation continues to be a matter of supply and demand. Airlines have been wary of adding capacity, waiting instead to see if the U.S. recovery takes hold and lifts the world economy. Meanwhile, demand has become much more robust—at least in the United States.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Scheduled - air cargo (property) | +0.2 | -0.5 | +2.9 |
| Domestic air courier | -0.7 | -1.1 | +0.9 |
| International air courier | -1.2 | -1.6 | +1.7 |
Water
In a surprise development, our water transportation price index fell in November 2003, down 1.6% from October's levels. The cause lies with inbound liner prices, which fell 5.7%. That was the first drop in six months, but it did little to offset the 17.9% and 6.1% price hikes recorded in May and June, respectively. Prices on other waterways continued to rise. Domestic deep sea rates were up 0.9%, and Mississippi River prices rose 3.3%. Prices for moving refined petroleum down Ol' Miss rose by 1.7% that month. Prices for other products, excluding coal and petroleum, jumped by 5.8% in November. We forecast our water transportation price index to rise 8.5% in 2004.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Inbound liner | -5.7 | 0.0 | +13.3 |
| Outbound liner | +0.1 | +0.6 | +4.2 |
| Domestic deep sea | +0.9 | +0.8 | +2.5 |
| Grt. Lks.-St. Lawrence | 0.0 | +0.2 | +0.2 |
| Mississippi River | +3.3 | +7.5 | +1.5 |
Rail
Any doubts about whether rail companies are benefiting from the economic recovery were laid to rest by data from the U.S. Bureau of Labor Statistics' November 2003 survey. Rail haulers instituted a 0.3% one-month price hike for both intermodal and carload traffic. Shippers of chemicals and paper-related products saw the largest one-month price increases at 1.4% and 0.6% respectively. That translated into respective year-ago price hikes of 4.5% and 3.1%. Meanwhile, prices for carloads of farm products were up 6% compared to a year ago as grain cars remained scarce. We expect an average 2.2% price hike for rail freight in 2004 after a 2.0% increase in 2003.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Coal/Petroleum | 0.0 | +1.2 | +1.3 |
| Chemicals | +1.4 | +2.9 | +4.4 |
| Farm products | 0.0 | +3.4 | +6.0 |
| Metallic ores | -0.1 | +0.1 | +1.2 |
| Motor vehicles | 0.0 | +0.8 | +4.5 |
Focus on technology costs
Falling prices for computer hardware will continue to make technology purchases more affordable for transportation and logistics service providers. We expect computer makers will have to compete hard for both business spending and consumer dollars this year. As they do, buyers will see some sharp price cuts. Our latest forecast shows industry tags plunging 29% between 2003:Q4 and 2004:Q4. We're forecasting that most of this decline will come in the first half of the year, with declines of 12% and 7.2% in the first and second quarters of 2004. Looking ahead, year-over-year growth in U.S. end markets for computers is expected to hit a short-run peak of 11.5% in 2004:Q4. Over the course of 2005, end-market growth will ease to 9.5%. As it does, computer makers will respond by slowing the pace of price cuts.
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