First, the historical explanation. Last year was year 1 of a new postal requirement to tie postal increases into the CPI-Consumer Price Index. If the CPI went up 7%, postage could go up 7%. The rate change was to be announced in January based on the previous 12 months of CPI, and implemented 5 months later, in May. It was neat, clean and surgical. Almost foolproof!
As of August of 2008, it was looking like a 5-6% increase in postage for 2009. Then came bank failures, bailouts, plummeting energy costs and the specter
of worldwide recession and the CPI fell. By the end of December, the CPI
was at 3.8%.
So just last week, the USPS announced its tentative 2009 postal increase: 3.8%. Sort of.
Now the practical explanation. You have to understand that the USPS's 3.8% is blended across an entire class of mail. Standard or non-profit mail, for instance, which have a dozen different rate categories based on mailing list distribution, package presentation and presence (or lack of) a barcode, can see higher increases in some categories and lower increases in other categories. But the blended effect should not exceed 3.8%.
Right? Maybe not.
Like Roll-Over Minutes, the USPS has some of its "unused rate authority" left over from last year's rate increases. By law, the USPS can "bank" the difference between the CPI cap and the implemented rate changes for use the following year. The USPS may use its 2008 leftover to pump up the new rate increases to closer to 4%.
There is also a possibility that the USPS--which has been losing money at an alarming rate for years--may either ask for a second increase in 2009 or ask for permission to exceed the 3.8% cap. We'll know more on February 9th when the USPS is expected to make its final announcement.
You think you have it bad? Pity the Periodical mailers. It costs the USPS more to mail periodicals than the rates allow. So the USPS may "pierce the price cap" to make Periodicals ante up more dough. As much as 20% more!
There's also talk of increasing letter rates more to help offset the problem with Periodicals. This is robbing Peter to pay Paul, but may be what the USPS decides to do. Stay tuned.
Anyway, based on the best current intelligence, it looks like the average rate change will be:
3.814% for First Class
3.862% for Standard
3.8% for Nonprofit
3.976% for Periodicals
+ the ace-in-the-hole "unused authority"
For purposes of budgeting, assume 4% across the board (periodicals aside). We'll get back to you as soon as we have definitive info to share.