Each year, as part of the Annual Compliance Review process, the USPS must provide the PRC documentation of demand elasticities and volume forecasts. The goal of the forecasting process is to first identify the factors that have caused mail volume to change historically and to quantify the exact relationship between these factors and mail volume as best as possible.
Three of the primary factors used in these equations include:
- Rate Effect Multipliers (Price Factors): The methodology relies heavily on price indicators to determine how sensitive mail volume is to rate changes.
- Non-Rate Effect Multipliers (Economic Factors): This category encompasses the broader economic and demographic variables that drive mail usage.
- Composite Multipliers (Operational and Behavioral Factors): These factors handle the residual influences not captured by rates or general economics.
The purpose of these demand equations is to quantify the relationship (elasticity) between these factors and mail volume, based on historical data. Once those relationships are established, the USPS plugs in future projections, such as expected GDP growth or planned rate hikes, to generate a “mechanical” volume forecast.
This forecasting exercise is conducted annually by USPS and is a recurring point of dispute. Various industry studies argue that pricing has a much larger impact on mail elasticity than the Postal Service’s current models reflect.
Below are the forecasted volume declines for each quarter of FY26:
- Single Piece First-Class mail categories.
- Presort First-Class mail categories.
- Nonprofit Marketing mail categories.
- Commercial Marketing mail categories.
