A weak economy, poor retail performance and slumping print advertising revenue, combined with sharp cost increases for paper, postage, energy and transport, are eating into budgets for catalogs and direct mailing companies, according to a new study by Massachusetts paper-industry analyst RISI.

According to the report, most paper producers have announced a $50-60 per ton price hike for July on coated mechanical paper - commonly used for glossy catalogs and direct mail packages - as they face year-over-year manufacturing cost increases of 12-14% in 2008 due to escalation in energy, wood, transport and chemical prices.

RISI found that demand for specialty paper in North America fell 13.5 percent as printers scaled back and started using up existing supplies.

The cutbacks could mean that American households may have lighter mailboxes come the holiday season, according to RISI analysts.