It's official. The U.S. trucking industry overall did indeed boost average prices by 3.9% in 2004. That represents the largest annual price hike since 2000. For 2005, shippers can expect the annual rate of inflation for trucking services to peak in the second quarter. A cyclical downward slide, expected to pick up speed over time, will follow in the second half of 2005 and continue into 2006. All told, the industry is forecast to push through price increases of 3.3% in 2005 and 2.4% in 2006. Truckload rates are key to this forecast. In 2004, TL prices rose by 4.1%, significantly higher than the next-most inflationary year, 2000, when they jumped 2.6%.

In the final quarter of 2004, average prices for shipping on scheduled airlines took off, rising 5.4%. That's a sharp departure from the deflationary price picture we saw in the first three quarters of 2004. During that period, average prices fell 1.6% in Q1, dropped 1.8% in Q2, and increased by an anemic 0.3% in Q3. Is this latest price hike indicative of turbulence ahead? We're hedging our bets by predicting price hikes of 3.3% in 2005 and 2.8% in 2006. So the outlook doesn't indicate the kind of increases we saw in 2002 and 2003 (5.1% and 4.1%, respectively), but neither does it suggest a return of the manageable 0.5% annual price increase set in 2004.

Rarely do we see a price trend that has turned the corner as sharply as the current trend in water transportation has done. In December our aggregate price index sat at 135.8 (based to 100 in 2001). By the end of 2004, the annual inflation rate for water transportation had tumbled to 3%, down from 20.1% in the third quarter of 2003. The industry may buck the trends of the last two business-cycle troughs, in 1998:Q1 and 2002:Q3. Back then, average price escalation was -1.75% and +6.1%, respectively. After those slumps, prices roared upward. This time, we believe, the annual inflation rate will stall between 1.8% and 4% throughout the eight quarters of 2005 and 2006.

The North American rail industry seems to be hiking prices with a full head of steam. In 2004, we saw average industry prices increase from year-ago levels by 3.3% in each of the first two quarters of the year, followed by a 4.2% gain in the third quarter and ending the year with a 6% jump. That inflation pattern has been much more threatening to logistics managers' budgets than in any other year over the last decade. Indeed, in 2003, average rail industry prices saw relatively low inflation rates, ranging from a high of 3% in Q4 to a low of 1.6% in Q1. How will the inflation trend for rail shipping behave over the next two years? We predict industry prices will remain fairly high in the first two quarters of 2005. All told, we are looking for average rail prices to increase 4% in 2005, followed by a 1.6% gain in 2006.