Transportation Economic Trends
Cost of Transportation:
Transportation Economic Concepts
This page highlights transportation economic concepts related to how much transportation costs from the perspective of producers and purchasers (businesses and households).
Transportation Cost and
Cost refers to the monetary value of the resources used to produce transportation services—labor, equipment, fuel, and infrastructure. The cost of the resources used by producers of transportation services influences the prices they charge.
Price is the sum of the cost of the resources used plus mark-up and tax. It is the amount purchasers pay for a product or service.
Producers are the firms that carry out transportation operations to move people and goods. For example, trucking companies that haul merchandise to stores and air carriers that transport freight and passengers.
Users are purchasers, who may be either households—known as consumers—or businesses.
What is the Producer Price Index and Consumer Price Index? What are Their Differences?
The Producer Price Index and the Consumer Price Index measure transportation costs from two different perspectives-the perspective of the producer versus purchasers (in this case, households, also known as consumers).
Producer Price Index
The Producer Price Index (PPI) captures the weighted average of wholesale or producer prices that producers of transportation services (e.g., air carriers and trucking companies) charge. The PPI for a mode of transportation measures the average change in the amount received by producers. For example, the rail producer price index uses a survey of railroad prices charged to shippers. The PPI for trucking services measures the average change over time in the amount received for trucking services. The PPI differs from the Consumer Price Index, which shows changes in prices paid by households purchasing transportation services.
The PPI, published by the Bureau of Labor Statistics (BLS), is one of the most widely used measures. BLS surveys a sample of individual business establishments. Because values are from the point of view of the producer of transportation services, they exclude items like sales and excise taxes. BLS weights prices by the size of establishment’s revenue to create indexes for narrowly defined services (e.g., local specialized freight trucking excluding used goods) and then combines them into aggregated indexes (e.g., all trucking) using value-of-shipments data from the economic censuses of the Bureau of the Census. BLS publishes data for both broad and more narrowly defined indexes.
Consumer Price Index
The Consumer Price Index for all Urban Consumers (CPI) measures the average change over time in the prices urban consumers paid for a market basket of consumer goods and services. The CPI covers the spending by 93 percent of the total U.S. population. It includes expenditures made by residents of urban or metropolitan areas. It does not include spending patterns of people living in rural nonmetropolitan areas, those in farm households, people in the Armed Forces, and those in institutions, such as prisons and mental hospitals.
The CPI for goods and services, such as ones related to transportation, show changes in prices paid by consumers for transportation related goods and services. Comparing the CPI for all goods and services to the CPI for transportation shows which transportation items are contributing to changes in the consumer cost of living. Comparing mode-specific CPIs shows which modes of transportation are becoming more expensive relative to other modes of transportation.