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

This summer's relentless rise in LTL rates resumed as average prices reported for July rose 0.4% over rates for the previous month and 4.4% compared to the same month a year earlier. Truckload carriers say their average prices also increased, up 0.4% and 2.3% over the previous month's and year-ago levels, respectively. Truck rental prices rose at an even faster rate, up 5% over the previous month's levels and 5.9% compared to prices a year earlier. Our annual inflation forecast for all trucking and land courier services (which excludes consumer rentals) remains at 2.4% for 2003 and 2.2% for 2004.

Domestic airlines are passing along their margin woes to customers by hiking prices for shipping cargo and mail via scheduled flights. In July, those prices soared by 4.3% and 9.6%, respectively, from year-ago levels. International air couriers, meanwhile, increased their prices by 2.8%. Reasons for the air industry's profit problems are legion, but fuel costs certainly loom large. U.S. airports hiked the price of fueling services by 12.5% from July 2002 to July 2003 as jet fuel tags jumped 11.4%. Our forecast calls for domestic airline prices to rise at an annual rate of 5.4% in 2003, slowing to only 1% in 2004.

We're in the wake of another huge wave of price hikes by ocean carriers that report their inbound deep-sea foreign transportation rates to the U.S. government. In July 2003, inbound liner prices increased by 6.1% from June's levels. Compared to a year ago, inbound liner prices are up 34.3%, which far eclipses a 5.2% uptick for outbound liner prices. Over the same one-year period, domestic deep-sea freight carriers and Mississippi River barges reported more modest price hikes of 2.8% and 2.2%, respectively. What does all this mean for our aggregate water-transportation services forecast? Expect another upward revision to our inflation prognosis in the next issue.

Rail rates didn't jump the track from June to July, at least at the aggregate level, as operators reported a meager 0.1% dip in average transaction prices. Intermodal prices increased by 1.1% and prices for hauling bulk commodities fell by 0.3%. Compared to the same month a year ago, average prices for intermodal and boxcar service increased 2.1% and 1.7%, respectively, with boxcar price pressures felt most sharply by shippers of farm products, transportation equipment, chemicals, and stone-clay-glass-concrete products. The outlook for all rail services calls for 1.5% annual inflation in 2003, slowing to 0.3% in 2004.

After a brief decline in oil prices as the war with Iraq began to wind down, wholesale prices for domestic refined petroleum gained 6.4% in June and 2.6% in July. In August, buyers faced a menu of problems that included (1) crude production in Iraq below expectations, (2) high worldwide demand, (3) an electricity blackout slowing production on the East Coast, (4) a pipeline rupture in Texas, and (5) problems manufacturing low-emissions gasoline in California. So by the time the dog days of summer rolled around, average U.S. gasoline prices stood at $1.63 per gallon while diesel fuel hit $1.50 per gallon. Some relief may be in sight, though: We forecast manufacturing costs in the U.S. petroleum industry will fall 26% in 2004, which is a complete reversal from the 26% cost hike estimated for 2003.