Can companies raise prices in a recession? UPS and FedEx will

FedEx (NYSE: FDX) is going to raise the rates on many of its services in January of next year. UPS (NYSE: UPS) is planning the same thing. The price increase from FedEx will be close to 7% .

According to The Wall Street Journal, "The increases come as shipping companies benefit from slumping fuel costs but are hampered by falling demand."

The move is a very big risk. During a recession, businesses and consumers will find almost any way they can to cut corners. FedEx still has formidable competition from the United State Post Office, which offers its own ground and overnight products.

FedEx is faced with the "damned if you do, damned if you don't" puzzle that most companies in an economic downturn are scrambling to solve. It needs to keep its revenue as high a level as possible. At the same time, it risks losing customers by making clients pay more than they ca afford.

The U.S. Postal System has lost much of its relevance as people move away from sending letters and documents through the mail in favor of electronic transfers and communications. FedEx might just help the USPS pick up some customers, if the old government-supported agency keeps its rates down.

Douglas A. McIntyre is an editor at 24/7 Wall St.