United Parcel Service said increased demand in domestic ground shipments lifted profits in the third quarter and expects online sales to boost shipping volumes as it heads into the holiday quarter.

UPS, which delivered more than one billion packages worldwide during the quarter, also reconfirmed its profit view for the year.

Shipment volume and forecasts at UPS, along with rival FedEx, are closely watched by Wall Street and considered an indication of overall economic health because of the vast amount of goods they transport.

For this year's holiday season, UPS said it expects peak season daily volume to increase by eight per cent, with pick-up volumes for Cyber Monday increasing 10 per cent. Earlier in the week, rival FedEx forecast an 11pc rise for the same day, the Monday after Thanksgiving that is traditionally a big day for online holiday sales.

For the third quarter, UPS said daily ground shipping volumes rose 3 per cent, while next-day shipping fell 3.3 per cent. Clients have been shifting from pricey next-day air deliveries to more affordable shipping ways.

Also, manufacturers and retailers have become more savvy with their supply chains, planning shipments strategically to cut back on express shipping. This reduces costs for manufacturers, but hurts courier companies like UPS, which make more money on faster shipping.

UPS said some shippers have moved their distribution facilities closer to their customers, which slowed air shipment growth but led to a greater use of UPS Ground facilities.

For the third quarter, the Atlanta-based company earned $1.10 billion, or $1.16 a share, compared with $469 million or 48 cents a share a year earlier. The company expects earnings of between $4.65 and $4.85 per share for the current year.

Revenue came in at $13.52 billion, up 3.4 per cent over last year, mainly helped by US e-commerce shipments and strong European export growth.-Reuters