The bumpy economic recovery continues to take its toll on the trucking industry. From July to August 2002, LTL truckers managed to raise rates by 1.5%, while truckload operators saw their average rates rise a mere 0.2%. The truckers' failure to push through big rate hikes may make shippers happy, but tightening margins and an increase in bankruptcies will likely be the result. Consider this: In the 12 months ending with August 2002, rates for LTL shipping rose only 2.9% in contrast to the annual rate of 5.7% to 7.6% recorded from 1997 to 2001. Meanwhile, truckload rates actually declined 0.5% in the 12 months ending in August.

Rates for deep-sea foreign transportation of inbound freight rose 4.9% from August 2001 to August 2002, while deep-sea domestic rates rose 4.5% . Upward revisions to the data make tracking activity among water carriers tough. Surveys now show that rates for shipping freight over water rose 2.7% in the second quarter of 2002, not 0.6% as originally reported. Our adjusted forecast puts the annual rate of inflation for shipping freight via water at only 1.8% for the year ending with June 2003, not 4.5% as we had projected a month ago.

Linehaul operators report that average rates for hauling freight via rail fell 0.3% from July to August 2002. Nonetheless, shippers still paid 2.1% more than they paid in August 2001 on average, owing to earlier rate hikes. The inflationary rattle was loudest for shippers of transportation equipment, whose average rail rates rose 15.0% from year-ago levels. Railroads appear to be cashing in on the finished-products transport business. For example, the rate to ship products made from metal increased 4.0%, while the rate to haul unprocessed metal ores fell 1.3%.

When global aircargo rates plunged after 9/11, shippers shifted from ocean freight to air carriage. Now, however, rates will start to rise again. Our own analysis of the trends is stymied by the ups and downs of the rate series we track from the Bureau of Labor Statistics. We follow the average rate charged for shipping freight on scheduled U.S. airline flights. Two months ago, rates were reported to be up around 13.0% in 2002's first and second quarters from year-ago levels. Now those rate hikes have been revised to a mere 2.1%. As a result, we've revised our forecast to call for a 3.5% annual rate hike in 2002.

Fuel

If your carrier is playing the wage card during rate negotiations, this may be the time to call that bluff. A survey of average hourly earnings shows that U.S. transportation industry workers received a meager 0.3% wage hike in July and then watched their wages decline 0.2% in August. Trucking companies managed to hold average hourly earnings to $14.47 in July 2002, which was only a 1.2% increase from the same month a year ago. Companies that move freight over water paid their laborers $21.59 an hour in July—4.6% less than their June earnings.

Capital Equipment

With the economy in the doldrums, the prospects for an uptick in capital equipment prices appear to be weak. In July 2002, the average price for a completed civilian aircraft rose 0.7% (from year-ago levels), while prices for aircraft parts increased 1.1%. Weak end markets may be partially responsible for the slow rise. The aircraft industry has seen its end markets slip an estimated 12.4% in 2002. What goes down, of course, is bound to go up. We forecast that the aircraft industry end markets will enjoy a 9.5% rebound in 2003.