The financial outlook for the Postal Service is closely linked to the outlook for the U.S. economy. In the past two years, the American economy experienced its worst economic downturn since the Great Depression and mail volumes fell precipitously. Looking ahead, there are expectations for a gradual economic recovery in 2010. Although the Commerce Department recently reported that Quarter IV GDP rose at an annualized rate of 3.5%, compared to Quarter III, year-over-year growth was still negative. IHS Global Insight, an economic and forecasting consulting firm, is forecasting positive year-over-year growth in the economy as measured by real GDP beginning in our second quarter of 2010. This forecast projects very weak GDP growth for all of 2010.
Mail volume, however, is weakly correlated with GDP. Trends in employment, investment expenditures, and retail sales are better indicators of mail volume trends. Weak growth in investment and retail sales is predicted for 2010. Recovery in employment is expected to lag the broader economic recovery, just as it did in the recession of 2001.
In the longer term, economic growth as measured by all these statistics is expected to continue but at growth rates below those of the late 1990s. The slower long-term growth trend is expected to suppress long-term growth in mail volumes.
