North American rail service improved in the second quarter and year over year, according to Bear Stearns's quarterly survey of 1,000 shippers.

The survey respondents named CSX, Canadian National, and Canadian Pacific as having the most improved service.

Although 28 percent of the shippers still expect rail service to deteriorate during the peak season, this is down considerably from 53 percent a year ago.

Shippers expect to pay a 4.4-percent average rail rate increase in 2006, meaningfully up from 3.7 percent in the first quarter and 3.5 percent a year ago.

For the first time since UPS bought less-than-truckload carrier Overnite in 2005, the Bear Stearns survey revealed some caution by shippers. While representing only a small sampling, 40 percent of respondents who were previous Overnite users have moved some freight away from UPS Freight, while only eight percent of previous users have added more freight since the merger.

Early indications are much more favorable in the small sampling for current customers of Watkins Motor Lines and FedEx Freight. FedEx in May acquired Watkins, the long-haul less-than-truckload carrier, for $780 million.

The survey also found that current DHL customers continued to pare business based on service issues. Thirty percent of shippers believed DHL had become more aggressive in discounting pricing in recent months compared with just nine percent who believed DHL had become firmer on rates, the survey showed. DHL earlier this year struggled with service issues at its U.S. operations, the former Airborne Express.

Forty-four percent of the survey respondents described full-truckload capacity as "balanced;" 34 percent described the full-truckload market as "tight" and 22 percent as "over capacity." For the first time since 2001, no respondent saw "extremely tight" capacity. The survey found shippers see even greater less-than-truckload capacity availability.