UPS saw its net profit fall 21 percent in the second quarter as a faltering American economy and rising fuel costs cut sharply into domestic shipping demand.

The operating profit on domestic package shipping fell 24.6 percent compared to the same quarter last year as overnight air shipping volume fell 6.1 percent and volume at the core ground parcel business slipped 0.7 percent to its lowest point in any quarter since 2005.

That gave Atlanta-based UPS an $873 million net profit in the quarter, down from $1.1 billion a year ago and the company's smallest quarterly profit since 2004.

Overall, revenue at UPS grew 6.7 percent to just over $13 billion but the weakness on the domestic front sent the operating profit down 17.6 percent, to $1.45 billion.

"Although operating conditions in the second quarter were challenging, UPS firmly believes the long-term growth fundamentals for our company and for our industry are very favorable," said Scott Davis, UPS chairman and CEO. "We are helping our customers manage through this difficult period while doing everything we can inside UPS to adapt to current conditions."

That appears to include growing business at the Supply Chain and Freight operating unit. Revenue at that segment, which includes the logistics and LTL freight operations, grew 10.9 percent to $2.3 billion and the operating profit jumped 51 percent to $148 million.

Despite growing concerns about the U.S. economy, UPS is forecasting improvement in its business this year.

"Even though economists do not predict a recovery until 2009, we anticipate that the second half of 2008 will generate modestly better results than the first half, assuming business conditions do not worsen," said Kurt Kuehn, UPS's chief financial officer.