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

Less-than-truckload carriers led the inflation parade in May with a 1.8% price hike over the previous month. That was the third consecutive monthly price increase of 1.5% or more. During the three-month period ending May 2007, LTL prices were up only 2.8% above the same period in 2006. That inflation rate is small potatoes compared to the March-to-May inflation rates that we saw in 2005 (7.5%) and 2006 (7%). Meanwhile, average prices charged by long-distance TL carriers of general freight fell 0.1% in May and tags for long-distance carriers of special freight like chemicals dropped 0.2%. When all data has been calculated, we project trucking industry prices will be up 2.7% in 2007.

In May 2007, prices charged by domestic airlines to ship freight on scheduled flights jumped 4.4% from the previous month. This is the time of year when prices pick up, but a 4.4% gain is unusually stiff. The only other time airlines hiked prices higher in a single month was in October 2000, with a 5% jump. Freight forwarders bore the brunt of the domestic airline price jump. According to Department of Labor surveys, freight forwarders did their best to pass cost hikes along to their customers by pushing a 2.5% monthly price increase in May. Compared to 2006, freight forwarder prices are up 4.6%, domestic air courier tags are up 6%, and international air courier prices are up 8.3%.

The big 6.1% April price hike pushed by waterborne freight carriers who operate on the Great Lakes-St. Lawrence Seaway did not hold completely. In May these prices fell back only 1.8%. Looking at the 3-month trend line, we see that average prices for moving freight on the Great Lakes were up 7.2% in the three-months ending May 2007. That is only a minor slowdown from the 8.7% inflation rate experienced in the three-months ending May 2006. On inland waterways, an accumulation of monthly price cuts combined with a 0.4% price hike in May is now allowing barge companies to set price levels last seen in April 2006. The U.S. water transportation price index overall is forecast to slow to a 2.2% inflation rate by the end of 2007.

Intermodal rail carriers must be saying to themselves that any slowdown in freight traffic simply does not have to mean price concessions for shippers. In May, average prices charged by rail companies for hauling intermodal freight increased 1.3%, on the heels of a 1% hike in April and a 1.8% jump in March. Prices for intermodal service now sit just 1.2% below the intermodal industry’s peak price level set in August 2006. In the carload market, average prices increased a more modest 0.2% in May. Inflation trends, however, hit carload rail carriers harder: Carload prices are currently up 34% from 2001 average price levels. And, intermodal prices are up 23% from 2001.