Source: Elizabeth Baatz, Thinking Cap Solutions. E-mail: thinkcap@olypen.com

Back-to-back price declines from LTL carriers in April and May gave us pause— would a deflationary trend finally take hold? Apparently not: June's data show LTL prices trending back up 0.5% from May and up 2.9% from the same month a year ago. Still, June's price hike appeared relatively sedate compared to year-ago price hikes of 6.3%. Overall, LTL prices fell 0.7% between the first and second quarters of 2003. Our forecast assumes a cyclical shift is indeed underway, but further declines are unlikely. We forecast average LTL prices to increase 0.6% in the third quarter and 1.6% in the fourth.

Shippers might like to see a crash landing when it comes to air cargo prices, but soft landings are more likely. From May to June 2003, average prices for shipping property on scheduled airline flights declined by a sedate 0.8%. Prices charged by freight forwarders, who rely on international air carriers, fell just 0.1%. Air courier prices, meanwhile, dropped by a paltry 0.2%. After rising in the second quarter at a 7.1% rate compared to year-ago levels, growth in our U.S. airline price index is forecast to slow to a 3.5% rate in the final quarter of 2003. By the second quarter of 2004, prices will be 2.1% higher than they were during the same period a year earlier.

If you were hoping prices for water transportation services would recede after May's unexpected 5.6% surge, your hopes were soon dashed. June data for our aggregate industry metric shows prices dropping by an insignificant 0.1% from the previous month's levels. That's because price surveys of deep-sea liner shipping registered no change while Mississippi River barges showed a meager 0.2% decline. Our forecast builds upon trends tracked over a 12-month period. After rising at a 7.6% rate in the 12-month period ending June 2003, we forecast aggregate water transport prices will rise 8.8% and 7.5% in the third and fourth quarters of this year, respectively.

Average linehaul prices in the second quarter of 2003 chugged along on the 1.7% inflation track that we had previously forecasted. That's disturbing for shippers since that's a noticeable acceleration from the 1.2% rate in the first quarter of 2003, measured on a year-ago percent-change basis. The outlook for the third quarter remains pegged at a 1.7% year-ago rate, but then we expect it to slow to 1.4% in the final quarter. The cause of inflationary pressures remains the dastardly trio: metals, farm products, and automobiles, where rail transport prices in June increased 5.7%, 6.5%, and 4.7%, respectively, from year-ago levels.