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

In May, the U.S. trucking industry increased average transaction prices 1.9% from a month ago and 7.8% from the same month a year ago. That has set our forecast trajectory on an even steeper path than last month's upwardly revised outlook. Now, we are projecting a 6.7% (not 5.7%) annual price increase in 2008. With soaring diesel costs squeezing barely profitable tractor trailers off the road, shippers took the biggest hit in May from truckers who carry local freight. Here, prices jumped 4.9% from a month ago and 13.6% from the same month a year ago. Long-distance truckload prices, meanwhile, were up only 1.7% and 5.7% over the same month-ago, year-ago time periods.

The domestic air freight industry is rushing to keep pace with the underlying fuel cost surge. In May, average prices for flying cargo and mail on scheduled flights increased another 3%, on par with the 3% monthly price hike that was registered in April. Compared to May 2007, these air freight prices were up 14.3%. (By comparison, the wholesale price that domestic refiners charged for jet fuel soared 72% from a year ago.) Our forecast for domestic air freight industry prices has been pushed up sharply too. Instead of a 10% annual price increase in 2008, now we are projecting a 15% gain. But, historical price data is available only as far back as 1990, so air freight price forecasts should be viewed cautiously.

Shippers who move cargo over water are feeling the rush of inflationary pressures too, but the price data from U.S.-based shipping companies haven't been as volatile as truck and air freight. According to Labor Department surveys, average prices for waterborne transportation increased 0.2% from a month ago and 9.7% from the same month a year ago. This leaves our forecast relatively unchanged at 7.7% for 2008 and 3.3% for 2009. Looking at detailed price data, from May 2007 to May 2008 average prices were up 21.6% for shipping on inland waterways, 9.2% for coastal and Great Lakes shipping, and 6% for deep sea water transportation.

Nothing too surprising to report in the rail price outlook. According to the latest surveys of domestic rail companies by the U.S. Labor Department, in May average prices for moving freight by rail in carloads increased 1.7% from a month ago and 12.8% from the same month a year ago. Prices for intermodal rail service, meanwhile, increased a bit faster, up 2% from a month ago and 19.3% from the same month a year ago. Shifting traffic from trucking to rail and rising exports of grain and coal have bolstered the pricing power of railroads. We forecast average prices for rail transportation will rise 11% in 2008, followed by a 4.1% gain in 2009.