Examining Alternative Inflation Indices for Regulating Market Dominant Price Increases

The Postal Accountability and Enhancement Act, enacted in 2006, limited price increases for Market Dominant products to the rate of inflation measured by the Consumer Price Index for All Urban Consumers (CPI-U). In 2020, the Postal Regulatory Commission (PRC), while establishing additional price authorities, confirmed the use of CPI-U in the price cap.The USPS OIG examined the potential impact on price authority, revenue and coverage of postal cost inflation since FY 2011 if the price cap had been based on six alternative inflation indices instead of the CPI-U. We selected the Chained Consumer Price Index for All Urban Consumers (C-CPI-U), Personal Consumption Expenditures Price Index (PCE PI), Gross Domestic Product Price Index (GDP PI), Producer Price Index for Final Demand (PPI FD), Employment Cost Index (ECI), and Consumer Price Index for Delivery Services (CPI-DS). The analysis did not address the additional rate authorities such as mail density, and it did not consider mail elasticities.