The USPS exigent price increase went into effect on January 26 of this year. Since then, there has been a great deal of discussion and debate as to whether or not the increase should be permanent.
No matter the final decision, the timing of the 2015 CPI adjustment will likely be affected by the outcome of the debate so the USPS can avoid having to adjust prices more than once during the year.
We expect one price increase in 2015, and that should be the annual CPI adjustment (currently 1.471%). Only Congress could change that, and we’re not in a position to speculate on whether anything will happen there at this time.
For the last few years, the annual CPI increase has been implemented at the end of January. That may change in 2015, and the exigent increase of 2014 could be the reason. As you are aware, legal appeals by the USPS and the mailing industry (Quad included) are in motion. The USPS wants the court to reverse the PRC ruling that the exigent increase is only temporary until they recoup the lost revenue from the 2008 recession (considered a surcharge). The PMG and the Board of Governors want the exigent increase baked-in to the prices forever. The mailing industry is supporting the PRC’s decision on this aspect of the exigent case, but is also appealing and opposing the PRC’s exigent decision in its entirety….should not have been approved at all.
If the court rules in favor of the PRC’ s decision and maintains the 4.3% exigent increase as temporary, the USPS will probably change the timing of any CPI price adjustment. It’s estimated that the revenue lost during the recession should be recouped by about the August/September 2015 timeframe. At that time, the USPS would have to adjust prices so that the exigent increase was no longer part of the price structure. Since the Postal Service would rather only change prices (and the associated software) once a year, they may choose to hold off on any price adjustments until that time. It would also provide them with more time to make other changes in the pricing structure (i.e. – “robust” pricing for FSS including Bound Printed Matter, incenting 5-digit scheme pallets, etc.). And if CPI trends higher this year (chart below) which it did the last two months, it could also result in the USPS getting more revenue through the annual CPI adjustment.
The Postal Service just recently began to float this as a possible scenario for 2015. Nothing is confirmed. We and others have told them they need to be upfront as soon as possible on the schedule since it can/will have an impact on business plans going forward. As more information becomes available, we’ll pass it along.
Joe Schick,Quad/Graphics’ Vice President of Postal Affairs is an advocate for mailers and the print industry and works closely with the USPS and Congress to achieve effective postal reform.