In the traditional Christmas song, “The Twelve Days of Christmas,” the recipient of gifts from her generous, and obviously well-heeled, True Love sings of the unique gifts received over those twelve days. Obviously, the cost of those gifts varies with the state of the economy.
Back in 1984, the chief economist of Pennsylvania’s Provident National Bank, now PNC Financial Services, came up with a creative way to discuss the somewhat esoteric, but useful, price index. The prices of the gifts featured in “The Twelve Days of Christmas” would be tracked and compared to the closely followed Consumer Price Index compiled by the U.S. Bureau of Labor Statistics. The idea caught on and thus began the Christmas Price Index released annually by PNC.
Let’s take a look at these items for 2022 to see how much the song’s well-heeled True Love will have to come up with.
The price of the Partridge in a Pear Tree has risen from $222.68 to $280.18 for an increase of 25.8 percent. The price of the Partridge remained unchanged, at $20.18. But the price of the Pear Tree has risen from $202.50 to $260, a 28.4 percent increase, attributed to the rising cost of fertilizer. Unlike the producers of many primary products who have no pricing power, the producers of Pear Trees apparently have sufficient pricing power to pass higher production costs on to the consumer.
The price of the Two Turtle Doves has increased from $450 to $600, for a hefty 33.3 percent increase, attributable to the rising cost of feed. Again, we see the result of pricing power.
For the Three French Hens, we again see the rising costs of feed and the pricing power to pass along increased costs to the consumer. The price of the Three French Hens increased from $255 in 2021 to $318.75 in 2022 for a 25 percent increase.
The generous True Love gets a break for the Four Calling Birds as they remain priced at $600. No explanation is offered as to why there was no increase in price for these birds in contrast to the higher production costs and prices for the Turtle Doves and French Hens. A possible explanation would be on the demand side, that is, reduced demand rendering it impossible to raise prices.
The price of the Five Golden Rings has risen from $895 to $1,245 for nearly a 40 percent increase. As investors see gold as a hedge against rising prices, the price of gold tends to rise during inflationary periods.
Consistent with rising prices for most of the birds, the price of the Six Geese-a-Laying has risen from $660 to $720 for a 9.1 percent increase.
The Seven Swans-a-Swimming have traditionally been the most costly of the items, while this year dropping to the second most costly. Though remaining at the stiff price of $13,125, the True Love gets a break, of sort that is, as the year saw no price increase for these high status, pricey water fowl. The price stability of this expensive item that bears such large weight in this index is largely responsible for the index rising far less than it otherwise would.
The long suffering Eight Maids-a-Milking still prices out according to the federal minimum wage that remains unchanged from 2009. This gift sets our True Love back for a mere $58. However, as a practical matter, one wonders where he could find eight women who would be even willing to perform this arduous task for such measly remuneration.
The highly skilled dancers enjoyed increased compensation in 2022. This is consistent with increased demand and spending on services relative to goods throughout the economy. The Nine Ladies Dancing enjoyed a raise of ten percent, from $7,552.84 to $8,308.12.
The Ten Lords-a-Leaping do even better, with a raise from $11,260 to $13,980, a generous 24 percent increase, surpassing the increase of ten percent for the Ladies Dancing. There would seem to be some gender discrimination at work here.
Though receiving increased remuneration, the musicians don’t fare as well as the dancers of either gender. The Eleven Pipers Piping go from $2,943.93 to $3021.40 for a 2.6 percent raise.
Similarly, the Twelve Drummers Drumming received a 2.6 percent raise, from $3183.17 to 3266.33.
The total cost of the twelve gifts sets our True Love back $45,523 and change, a 10.5 percent increase over 2021. But recall that the gifts are given repetitively over the twelve days. When accumulated over the twelve days, this totals to a staggering $197,071, for a 9.8 percent increase over 2021. Were it not for the stable price of the Seven Swans-a-Swimming, the cost increase borne by the True Love would be even more formidable.
The inflation indicated by the PNC CPI is greater than the November year over year BLS CPI of 7.1 percent. This is surely due in part to the high labor component of the PNC CPI.
Shopping on line seems to be all the rage these days. But this would not be a rational choice for our True Love, as cost of even a single set of the twelve gifts would increase from $45,523 to $49,663. After all, shipping birds is expensive.
It is of small comfort that inflation in the American economy is at a lower rate than in much of the rest of the world. The nation is depending on the FED to curb inflation. The problem is that its blunt instrument of manipulating interest rates is ill-suited to dealing with inflation’s primary cause, supply issues related to recovery from the pandemic, including labor shortages exacerbated by massive retirements of the Baby Boom generation.
Curbing demand and spending through raising interest rates can blunt price increases, albeit at the cost of economic slowdown, or outright recession. But unless the President and the Congress initiate longer run policies to deal with supply issues, the nation, and our True Love, will face a Hobson’s choice of continued inflation, or recession, or maybe some of each.
— John Waelti’s column appears monthly in the Times. He can be reached at jjwaelti1@tds.net.
