If your business relies on FedEx for shipping its products, this might not be welcome news:  FedEx (NYSE: FDX) plans to raise prices by an average of 3.9% starting Jan. 3. 

The world’s largest air-cargo carrier said yesterday that it needs the rate hike to compensate for rising fuel costs.  FedEx spent about $887 million on fuel in the quarter ended Aug. 31, up 33% from the same period a year earlier.

“This pricing adjustment will allow for key investments that will enable FedEx to continue to provide industry leading service and shipping solutions,” said T. Michael Glen, a FedEx vice president.  

While the price increase may disgruntle some customers, FedEx’s business is quite strong.  On Sept. 16, the shipping company reported first-quarter earnings of $1.20 per share or $380 million, up from 58 cents a share or $181 million a year earlier.

Over the past 12 months, FDX stock has gained 16.9%.  And although FedEx missed earnings estimates by a cent last quarter, it had outperformed earnings estimates the three previous quarters. 

FedEx’s price hike will come a year after competitor UPS

(NYSE: UPS) raised its shipping fees by 4.9%.  Despite the increase, UPS stock has flourished in 2010, gaining 18.1% since January.  UPS has also outperformed earning estimates for four straight quarters.

Investors closely watch FedEx and UPS, since higher shipping volume generally bodes well for the economy. As more packages are shipped, it’s safe to assume that more people are buying and selling goods.

FedEx plans to lay off about 1,700 employees by the end of January, after FedEx Freight next-day and second-day operations and its FedEx National LTL operations are combined. 

FedEx stock may be unaffected by the increase in shipping rates.  If UPS’s 2010 performance is any indication, businesses and consumers will continue using shipping services regardless of the cost.