With shippers shifting more freight from air service to less-expensive ground transport, it's no wonder less-than-truckload rates are on the rise. Average rates for LTL service rose 0.8% in May on the heels of a 0.3% hike in April and a 0.1% increase in March. These rate hikes may look meager, but shippers should note that we haven't seen three consecutive months of rate hikes since early 2000. Rates for truckload service, meanwhile, fell 0.1% in May—the sixth monthly rate drop in seven months—so the deflation trend clearly continues to offset any demand-driven inflationary tendencies among truckload operators.

Linehaul operators raised rates a mere tenth of a percentage point in May. Nonetheless, average linehaul rates are up 2.3% compared to year-ago figures. Hikes in the price of passenger tickets account for some of the inflationary pressures, but shippers of transportation equipment, lumber and primary metals bore the brunt of the increase. Rates for hauling these three commodities via rail surged 15.5%, 9.6% and 5.5%, respectively, from May 2001 to May 2002. By contrast, average rates for hauling stone, clay and glass products fell 6.0%.

Overall, average rates for moving freight over water rose 3.1% from April to May 2002. That wasn't such a large jump, though, when compared to past years' April/May rate hikes. For example, average water transportation rates rose 4.9% in 2000 and 7.9% in 1999. Analyzing this year's May rate increase, we see that inbound deep-sea foreign transportation of freight was the biggest contributor, rising 9.1%. Domestic deep-sea rates rose 5.3% and rates for shipping on the Mississippi River (excluding coal and refined petroleum products) surged 5.8%.

According to surveys from the Bureau of Labor Statistics, average rates for shipping cargo via scheduled airline flights soared out of the stratosphere in March and April. But that all changed quickly in May, when these rates came in for a landing, dropping a full 27.7% from the previous month's figures. As a result, average rates for shipping on scheduled flights are up just 2.1% from year-ago levels. Rates for using domestic air couriers, meanwhile, rose just 0.3% from April to May, while rates for flying cargo (and passengers) on nonscheduled flights increased 1.5%.

Ancillary Services

Transportation providers have suffered some inflationary blows from their ancillary service providers recently. For example, average rates for services rendered to aircargo (and passenger) carriers jumped 9.0% from May 2001 to May 2002. Lest you think it's only air carriers that are feeling the pinch, prices for tugging and towing ships and barges in the nation's harbors also rose 2.5%. That price hike was due in a large measure to a 2.8% increase for docking and undocking services.

Capital Equipment

Truck orders in North America have increased since 2001's fourth quarter, but most of the increase has been due to fleets' rushing to purchase their equipment before more costly engines are introduced on Oct. 1, 2002. Average prices for trucks, truck tractors and truck chassis (33,001 pounds or more) clearly reflect this artificial increase in demand. According to the U.S. Bureau of Labor Statistics producer price survey, average prices for large trucks rose 4.2% between May 2001 and May 2002.