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Newest postal rate hike may hit nonprofits hard

Written on Apr 21, 2023

Inflation rates, along with a drop in U.S mail volume, are boosting the case for postage rate increases, according to a memo from The Alliance of Nonprofit Mailers. U.S. Postal Services officials filed its case at the Postal Regulatory Commission yesterday.  

The base increases are expected to include an additional 5.4% for First Class Mail and Marketing Mail (formerly known as Standard Mail) letters, 7.4% or more for Marketing Mail flats and Carrier Route Flats, and 8.1% for Periodicals. These are averages for the categories, as the Postal Service has multiple sub-rates within each category. Given the 90-day notice requirement for new rates, the rates are expected to be implemented on July 9. 

Increases are partly based on the Consumer Price Index, but the calculations include other variables. One variable is based on declines in mail volume. If mail volume during a 12-month period drops by an aggregate 10%, for example, the Postal Service’s calculations could include an additional 4.5% hike on top of other considerations, according to scenarios presented by the Alliance of Nonprofit Mailers. 

Since the start of the 2023 USPS fiscal year in October 2022, through February 2023, mail volume is off by an aggregate 6.7% from the same period the previous year. But, the trend in mail volume drop is accelerating. February 2023’s volume was 10.8% less than that of February 2022. 

Postal volumes would have to drop more than 12.3% for each of the remaining months in the USPS’s fiscal year for the hypothetical scenario to go into effect (smaller and larger increases are also possible).  

One of the strongest headwinds comes from a decision implemented by the postmaster general to propose rate increases every six months. The next rate hike would go into effect in mid-July, possibly as early as July 9, potentially causing all mailers, nonprofit and otherwise, to evaluate volume at the fringes of their campaign during the remaining months of the USPS’s fiscal year and beyond. Prospect lists with uncertain potential, along with customers of marginal value, could be eliminated from mail campaigns, causing the volume decline that would trigger further postage hikes. 

Postage price increases have boomed during the past two years. If the full authority to raise prices is granted, between January 2021 and July 2023 postage rates for First-Class Mail will have jumped 27.2%, those for USPS Marketing Mail will have increased by 26.8% and Periodicals rates will have jumped by 34%.