Up to your eyes in budget planning? Here’s an outlook report for 2011.
Your manufacturing costs for your publications will continue to be one of your largest expenses as you start your budget review. However, there have been a few significant changes in the manufacturing arena that should be taken into consideration during this process.
Paper— Paper prices have increased an average of $8.00/cwt. for text stock since January 2010 with the latest October 1 pricing announcement. The paper mills have worked to get back to the pricing levels of late 2008 before paper prices started to drop. Your budgets will start at a considerably higher price point than your 2010 budget. Predicting paper price increases for 2011 is akin to looking into a crystal ball. No one knows what paper demand will look like in Q1; however there is talk that mills are trying for another increase for January 1, 2011. You may want to budget for at least one 5% increase starting in Q1 or Q2 . This is a fairly conservative route that can be revisited at the end of the year or in early 2010.
Postage—The association industry received very good news in late September when the Postal Regulatory Commission turned down the USPS request for an exigent rate increase for January 2011. You should still plan for a 3% increase in May 2011 based on the CPI provisions of the current postal law. There is also a possibility that the USPS might ask to start this increase prior to the traditional May increase date.
Printing—Most print contract increases are based on the change in CPI over a 12 month period. The change in CPI growth through August 2010 is 1.5%. Review your current print contract to review the CPI calculation. It is always a good idea to confirm your assumption with your print salesperson. This CPI increase is for all pricing in your contract with the exception of ink, paper and freight. The paper increase is a known fact; you should ask your printer about any potential ink increases.
These are the biggest areas to review and account for in your 2011 budget. The outcome may be difficult to justify in light of cost savings initiatives. However, you will be in a much better position to present realistic budgets given the current commodity changes and CPI increase.