The U.S. trucking industry raised rates by 0.4% on average between December 2000 and January 2001. Compared with January 2000 levels, January 2001 trucking rates reflected a 4.8% hike, not too far off October 2000's record high jump of 5.2%. But with the economy headed for a soft landing, the inflation rate for trucking services should slow down, too. In the fourth quarter of 2000, trucking rates rose 5.2% from year-ago levels. In the final quarter of 2001, price inflation will run only 2.8% above year-ago levels.

After falling 5.7% in December 2000, average prices for shipping cargo via inbound ocean liners dropped another 3.7% between December 2000 and January 2001. Unfortunately for logistics managers, rates for shipping cargo on outbound ocean liners rose 3.8% at the same time. As a result, water shippers experienced an 8.8% price hike over year-ago levels in the last quarter of 2000. Our forecast for shipping by water shows average price escalation slowing from 8.8% to 7.5% in the first quarter of 2001, to 2.9% in Q2, and dropping by 1.6% in Q4.

Thanks to a 0.3% average price increase, the December 2000-to-January 2001 period showed little sign of rail rate abatement even though freight traffic continues to grow at a low (2.0%) rate at most major railroads. With a recession looming, U.S. railroad operators probably will see traffic slow even further. Although lingering margin pressures due to last year's fuel-cost spike will likely prompt railroads to keep pressing for rate hikes, we think the effect of slowing demand will foil their efforts. Our forecast calls for rail rates to rise only 1.1% on average in 2001.

If higher jet-fuel prices, adverse weather, and labor-related flight disruptions weren't a big enough headache, providers of aircargo transportation services now appear to be facing another challenge: slowing demand. Between December 2000 and January 2001, average prices for flying cargo dropped 3.8%. That was the fourth largest monthly decline in prices over the past seven years. After rising at a rate of 5.9% over year-ago levels in the final quarter of 2000, aircargo rates will rise just 3.5% from year-ago levels in the first quarter and 1.6% in the second quarter, before falling 5.7% in the final quarter of 2001.