Source: Elizabeth Baatz,Thinking Cap Solutions. E-mail: ebaatz@ice-alert.com

Carriers stepped on the price accelerator across the board. Average prices for trucking services in August increased 0.4% from the previous month and 4.1% compared to the same month a year ago, according to the Bureau of Labor Statistics. Truckload carriers kicked prices up 4.1% from August 2003 to August 2004, while less-than-truckload operators raised average rates by 5.4% over the same period. Local general freight carriers, meanwhile, raised rates by 6.2%. Given current high fuel costs, the outlook doesn't look good for price relief anytime soon. We forecast average trucking prices will rise 2.9% in 2005 after a 3.5% gain in 2004.

Airlines are having trouble generating lift in airfreight pricing. Domestic carriers dropped their average prices by a full percentage point from July to August. Compared to a year ago, prices for general property on scheduled flights rose by just 1.2%, while those for transporting mail fell by 3.1%. Air couriers, meanwhile, have instituted some hefty price hikes. From August 2003 to August 2004, domestic and international couriers hiked average prices by 7.4% and 6.3%, respectively. Cost-push inflation is at fault: In August, prices for aircraft fuels and lubricants jumped 10%, while the cost of aircraft maintenance and repair increased 7% from a year ago.

Deep-sea freight rates appear to be treading water. Bureau of Labor Statistics surveys show average prices were unchanged from July to August. Compared to August 2003, those rates were down 4.2%. Inland-waterways carriers pushed through a one-month price hike of 1.2% in August, leaving prices 6.5% higher than they were at the same time last year. Prices for shipping on the Great Lakes and the St. Lawrence Seaway also inched up, rising 0.3% from July to August. Great Lakes carriers raised their prices by just 0.9% from a year ago. Our aggregate price forecast calls for an annual inflation rate of 6.3% in 2005, which will follow an estimated 2.8% hike in 2004.

Rail freight prices stood unchanged from July to August. Both carload and intermodal carriers reported no change in prices during that period. Still, average carload rates were up 4.5% in August 2004 versus a year ago. Thanks to tight capacity and congestion, some commodities have seen significant increases in their rates. Shippers of farm products, for example, saw carload prices jump 11.4% between August 2003 and August 2004. That was the largest inflationary burst of any of the commodities surveyed by the Bureau of Labor Statistics in August. Our latest forecast for rail freight calls for a 2.2% price hike in 2005, a modest improvement from the 2.6% annual increase expected in 2004.

With fuel prices red hot, inflation is on the rise in the transportation sector. Prices for most types of ground freight are very high by historical standards and are rising at an accelerated pace. Buyers of logistics services have also suffered cost increases. As a result, companies are trying to push through price hikes to cover for these higher costs even as they watch their margins deteriorate. A review of 455 manufacturing industries by Thinking Cap Solutions indicates that 284 industries endured margin losses in August 2004. Those losses generally resulted from producers passing along a portion of their higher costs to buyers, then swallowing the rest. Only 68 of the 455 industries, mostly in the food and textile sectors, weren't challenged by higher costs.