The Christmas season and gift giving is with us once again. Kids love it, and retailers depend on it, hoping that “Black Friday” will convert their bottom line from red to black.
We can lament the commercialization of Christmas. Nevertheless, giving and receiving gifts are crucial to bottom lines of commercial enterprises. There are some rather puzzling statistics floating around about this custom. We’re told that about one third of recipients return gifts. In past years, eleven to thirteen percent of gifts were returned to retailers on December 26. The peak day of returns is normally January 3, with UPS having estimated returns of 24 million parcels in 2018.
Another stat bandied about is that while many people incur debt with Christmas spending, only 20 percent of those incurring debt say that the “debt was worth it.” Considering the high level of returns, this leaves us with the curious situation of unhappy spenders giving gifts to less-than-happy recipients. But as long as expenditures are reasonable, “it is what it is.”
Which brings us to a most generous spender, the “True Love,” in the song, “The Twelve Days of Christmas.” For the 36th year, Pittsburg’s PNC Bank has computed the Christmas Price Index, based on the cost of gifts celebrated in that Christmas song. Let’s look at these prices for 2019, beginning with the Partridge in a Pear Tree.
The cost of the partridge remained constant at $20 and change. The cost of the pear tree declined by $10 to $190, leaving the cost of the Partridge in a Pear Tree at $210, for a 4.5% decrease from 2018.
The cost of the Two Turtle Doves declined from $375 to $300, its first decline since 2004.
Cost of the Three French Hens has remained stable at $181 and change. Cost of the Four Calling Birds also remained stable at just under $500.
Unless one is in the market for products involving gold, it’s mainly economists and financial professionals who follow its price. Those who follow this stuff know that the price of gold has risen in 2019. Normally, the price of gold varies inversely with strength of the dollar and strength of financial markets. A strong dollar and high-flying financial markets usually depress gold prices. But even with a relatively strong dollar and strong financial markets, the price of gold has risen in 2019. The most plausible explanation for rising gold prices under these conditions is uncertainty. With uncertainty, and caution regarding a precipitous drop in financial markets, gold is seen as a hedge against this possible financial debacle.
With higher gold prices, the song’s True Love finds that the cost of the Five Golden Rings has increased by 10%, from $750 to $825.
For the second year in a row, the cost of the Six Geese-a-Laying has increased, rising by 7.7%, from $390 to $420. This is curious as costs of inputs including feed have decreased, reflecting low farm commodity prices. Egg prices remain low, suggesting low returns from product. The primary economic rationale for rising prices for geese would seem to be that fewer people desire to raise geese, resulting in decreased supply of geese relative to demand.
The Seven Swans-a-Swimming are the most costly of the gifts, and also the most volatile in price. Nevertheless, their price remains unchanged at $13,125. The stability of this major item is a partial explanation for relatively stable costs of the total gift package.
As with many enterprises, a major cost is labor. The exception to high labor costs are the Eight Maids-a-Milking. The long-suffering Maids price out at a measly $58, unchanged for many years.
The Nine Ladies Dancing received a credible $7,552 and change. This is the seventh year with no price increases according to PHILADANCO of Philadelphia. Is this gender discrimination, weak bargaining power, or both?
According to Pennsylvania Ballet Co., the Ten Lords-a-Leaping had received a wage increase in 2018, but for 2019 their remuneration remained at a flat $10,000.
The musicians are apparently considered less skilled, or perhaps are in greater supply, than the dancers, and hence paid a lesser wage. The Eleven Pipers Piping billed out at just under $2,749. But they enjoyed a 0.8% increase in remuneration over 2018.
With their identical 0.8% increase, the Twelve Drummers Drumming received $2,972 and change.
One set of these gifts hit up the song’s True Love for just under $38,993. While costly by standards of most of us, this is just a .2% price increase over 2018. This increase is considerably below the U.S. Bureau of Labor Statistics (BLS) Consumer Price Index increase of 1.8%, just under the Fed’s target of 2%.
The BLS also computes a “core index,” omitting volatile food and energy costs. Similarly, the PNC computes a core Christmas Price Index by leaving out the usually volatile Seven Swans-a-Swimming. By omitting the Swans, the core PNC Christmas Price Index increased by .3% compared to the BLS core CPI at 2.3%.
By computing the cost of one set of these Christmas gifts, we are leaving our True Love off the hook. Recall that these gifts are given repetitively over 12 days — a rather incomprehensible and costly gesture of affection by standards of us penurious Swiss boys, and to all economists, for that matter.
By repetitively showering his lover over 12 days, our True Love incurs a hefty $170,298 bill, plus a couple of pennies. If it’s any consolation, the cumulative costs of giving these gifts over twelve days is less than that incurred in 2018, by a relatively inconsequential $64.20.
In summary, whether measured by the BLS CPI or by the PNC Christmas Price Index, inflation remains modest, below the Fed’s target.
How about next year? Trade wars, clouds on the economic horizon, or even a recession? We can’t predict the future, and maybe that’s a good thing.
— John Waelti of Monroe can be reached at jjwaelti1@tds.net.
His column appears Saturdays in the Monroe Times.
