Rising fuel prices and the slowing economy continued to eat at the U.S. Postal Service’s bottom line during the second quarter of 2008, the agency’s quarterly report says.

Overall mail volume was down 3.3 percent, compared with the same period last year, largely due to the struggling housing and financial sectors, two of the agency’s biggest mailers. First-class mail volume was down 3.1 percent. But other products also suffered: Express Mail volume was down more than 14 percent from 2007, and periodicals lost more than 4 percent.

“The financial and housing sectors again accounted for the largest portion of our decline,” Glen Walker, the agency’s chief financial officer, told the Postal Service Board of Governors last week, “and there’s no end in sight for those sectors.”

USPS did see its revenue increase, compared to 2007; Walker attributed that to a series of price changes that went into effect in 2007.

But rising expenses threaten to eat into that revenue. The high price of fuel sent the agency’s transportation costs up $175 million. Postal officials were able to trim $168 million from personnel-related expenses — by renegotiating collective bargaining agreements with several unions — but they warn those high fuel costs will continue to drain profits.

“The economy and fuel prices have been having a pronounced effect on the Postal Service,” said Postmaster General John Potter.

The agency hopes another price change will help to improve its financial picture. On May 12, the price of a first-class stamp increases from 41 cents to 42 cents. And other products — including Express Mail — will offer lower prices for most customers.

There was some good news for the agency. It reported its best-ever second quarter service: 96 percent of overnight mail, 94 percent of two-day mail, and 92 percent of three-day mail reached destinations on time.

And the beleaguered Chicago post office — which was rated the worst in the nation a year ago — made marked improvements. On-time ratings increased from 90 percent to 95 percent for overnight mail, and increased from 69 percent to 90 percent for three-day mail.