In December 2002, less-than-truckload (LTL) carriers reported a 1.6% drop in prices compared to the previous month's numbers. Truckload (TL) carriers, meanwhile, said their average prices fell 0.2% from November's levels. Motor carriers may grouse about how deflation is making it difficult for them to hike prices, but don't fall for those complaints. According to our data, average prices in December 2002 were up a satisfying 6.3% and 1% for LTL and TL, respectively, over year-earlier figures. This year will be different, though: Our forecast for all trucking and courier services, however, shows prices will rise a miniscule 1.5% in 2003.

Prices for shipping by water rose 9.7% between December 2001 and December 2002. That was the largest year-over-year price hike since the spring of 2000. The damage was done by inbound deep-sea ocean liners, which hiked prices at a monthly rate of 3% in December. Prices for that industry segment saw the greatest 12-month increase—a whopping 31.9%. The combined 2003 forecast for domestic and foreign deep-sea transportation, Great Lakes, and river shipping has been revised downward to 2.5% following a 3.2% increase in 2002.

Railroads held the line on pricing between November and December. One exception: chemical transportation, where the average price in December increased 6% over prices for the same period last year. The only other product group to see such a large jump was the ubiquitous "all other shipments" category, where prices rose 5.5%. Raising rail rates won't get easier in the months ahead. According to our forecast, average prices charged by U.S. rail companies for passenger and freight traffic combined are expected to rise just 0.8% in 2003.

U.S. airlines are suffering from high costs and low passenger volumes, so it's no wonder air cargo prices are feeling the heat. In December 2002, prices for scheduled air cargo transportation rose 0.2% over the previous month's figures and jumped 8.5% compared to the prices for the same month a year earlier. That price hike wasn't enough to mitigate bottom-line damages stemming from weak passenger volumes, but shippers shouldn't expect to continue bearing the brunt of the increases. After soaring 5.5% in 2002, air cargo rates via scheduled U.S. flights are forecast to increase at a much cooler 1% rate in 2003.

Fuel

Crude oil prices exceeded $34 a barrel in late January. The prospect of war with Iraq and the prolonged strike in Venezuela means U.S. petroleum prices will continue upward through the first half of 2003. By summer, prices will reach a short-run peak. The petroleum industry is expected to push through price declines of 5.9% in Q3 and 5.6% in Q4. Preliminary projections indicate a decline of 17.2% by the end of 2004. A modest economic recovery and a reduction in Middle East tensions are key assumptions behind this forecast.

Capital Equipment

Despite deflation in many manufacturing industries, prices for new trucking equipment continue to rise. Prices for trucks, tractors and chassis weighing 33,001 pounds or more increased 6.7% from December 2001 to December 2002. Renting or leasing offers no relief. From December 2001 to December 2002, rental prices rose 9.5%, while the average price to lease a semi-truck increased 6.9%. The price for leasing a tractor-trailer, meanwhile, rose a more sedate 1.1% over that same period.