Transport Firms Hoist Away on Prices Strong Economy Leads to First Increases in a Decade
Transportation companies are jacking up prices for the first time in a decade as the strong economy is filling trucks, ships and trains with more goods than they can handle.</br></br>Shipping companies have notified corporate customers that freight -- moving charges this year -- which total about $450 billion annually -- will rise between 5% and 10% for some cargoes.</br></br>Costs for package-hauling are also creeping upward. The U.S. Postal Service hopes to raise rates on its Priority Mail expedited service this year to $3.20 for a letter from $3.00, twice as big an increase as its last price boost in 1995. And giant United Parcel Service of America Inc. brought its commercial ground-transportation prices up 3.6% last month, partially to pay for its hefty new labor settlement with the Teamsters.</br></br>Already, a wide range of shippers, from chemical concerns to farmers, are noticing the shift. The drugstore giant Walgreen Co. says trucking companies just told it about a planned 5% rate hike, no small sum for a company that spends about $100 million a year on trucking. "You do your best in bargaining them down," says Tom Stedman, director of corporate transportation.</br></br>The price increases are coming at a time when overall inflation in the U.S. has been tame. The consumer price index, the nation's broadest measure of consumer price inflation, rose just 1.7% in 1997. And with commodity prices falling and inexpensive imports flooding into the country because of Asia's currency crisis, few economists believe rising transportation costs are enough to re-ignite inflation. But if those deflationary extras disappear, economists see cause for concern. At the very least, they say, corporate profits could suffer.