Postal Rate Hikes Unlikely Next Year

Inflation numbers released today made it increasingly clear that postal rates are unlikely to increase for two more years.

The Consumer Price Index rose only 0.25% from March to April, the U.S. Labor Department reported today, putting the index 0.7% below the level of April 2008. That means consumer prices would have to rise at an annualized rate above 4.5% for the rest of the year for the U.S. Postal Service to raise rates in May 2010 for the “market-dominant” classes – such as First Class, Standard, and Periodicals.

With the recession tamping down inflation this month and probably next month as well, prices would probably have to rise at an annualized rate of more than 6% in the second half for postal rates to increase at all in 2010.

The Postal Service would still apparently have the ability to adjust rates – such as a new pricing structure for mail going to the Flats Sequencing System – as long as average rates for a class do not increase. And with the money-losing USPS apparently on course to run out of funds within a year, there’s always the danger of it getting special permission to implement price increases that violate the CPI-based price cap.

There's also the question of when mailers will ever receive promised discounts from using the full-service Intelligent Mail barcode (IMb). Some large publishers have spent months testing the program so that they would be ready for free address-correction services on Monday. Now USPS has essentially thrown out that testing and started over, with a new round of testing to start Monday and implementation being at least weeks away.

Some of those publishers are asking for free address correction anyway, even though the Postal Service is not ready to automate the process. But postal officials involved in IMb are too busy issuing statements falsely claiming success to worry about yet another missed deadline.