What the economy gives, the economy can take away. Last month, we reported that intercity LTL trucking rates jumped 1.7% in June. But July's data show that much of that gain disappeared as LTL rates fell 1.1%. The brief price rally may not return, especially if the economic recovery fails to pick up much steam. For truckload operators especially, a weak economy will be tough to take. Here, average rates fell 0.1% in July. That was the ninth monthly decline in the last 12 months, indicating that TL operators are charging 0.8% less for their services now than they charged a year ago.

Average rates for shipping by water increased 0.7% from June to July. The impetus for the hike, as usual, came from the deep-sea foreign transportation sector. This time, though, the rate hike for outbound service (up 2.3%) exceeded that for inbound service (up 1.4%). Rates for moving containers to and from U.S. ports, meanwhile, slumped 2.2% from June and 4.7% from year-ago levels. On the Mississippi River, rates for shipping all freight rose 1.8%, while the rates for shipping refined petroleum products and coal rose 1.0% and 4.4%, respectively.

Rail pricing has hit a summer lull. July's average rates for trailer-on-flatcar shipments inched up 1.1% from June's numbers. But rates for non-intermodal shipping actually fell by 0.09%. Only two commodities saw much price inflation. Rates for hauling nonmetallic minerals rose 0.8% from June to July, as did the rate for hauling some farm products. Rail rates for other commodities held steady or rose only slightly. Shippers of refined petroleum and coal enjoyed the best price break, a 0.4% cut. Average rates for rail shipping are forecast to rise 0.8% in 2003.

With the nation's airlines falling into bankruptcy or retrenching routes, rates for shipping via scheduled airlines are going up, up, up. In July, the average rate for shipping on scheduled passenger aircraft jumped 2.3% from June and 2.6% from July of 2001. The cost of international shipping via air courier, meanwhile, rose 1.9% and 2.6% over the same time periods. Even freight forwarders, which have often shielded customers from rising rates, have entered the inflation game. According to the Bureau of Labor Statistics, average rates charged by freight forwarders rose 1.3% from July 2001 to July 2002.

Corrugated Boxes

Despite sharply higher costs, producers of corrugated and solid fiber boxes cut their average product prices slightly in July. Preliminary data indicate that per-unit spending on direct labor jumped 1.5%, while raw materials costs rose 1.2%. As a result, margins suffered an estimated 80-cent loss for each $100 of product sold. That was the largest one-month margin drop since March 2000. The average box supplier is expected to raise prices by 1.1% in the fourth quarter. Next year, box prices are expected to rise 1.3%.

Fuel

After posting a gain of 24.3% in the second quarter, petroleum refiners should exhibit more restraint for the rest of the year. We expect industry prices to rise 7.6% in Q3 of this year, mostly on the strength of seasonal demand, and 2.3% in Q4. U.S. end markets for refined petroleum, meanwhile, are likely to continue contracting. Refiners could discount prices by 3.3% and still earn a fair return on manufacturing-related spending. By the end of 2002, however, petroleum refiners will need a 1.1% price hike.