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Inflation Hits The Twelve Days of Christmas

(MoneyWatch) Inflation is currently boosting U.S. prices by a paltry 1 percent annually, but don't tell that to anyone who has the insane notion of buying all the goods in the holiday classic "The Twelve Days of Christmas." That hapless consumer would be spending a whopping $27,393 in 2013, some 7.7 percent more this year than last, according to PNC Financial Services Group, which has been compiling the cost of buying all the items in this song for some 30 years.

(MoneyWatch) Inflation is currently boosting U.S. prices by a paltry 1 percent annually, but don't tell that to anyone who has the insane notion of buying all the goods in the holiday classic "The Twelve Days of Christmas." That hapless consumer would be spending a whopping $27,393 in 2013, some 7.7 percent more this year than last, according to PNC Financial Services Group, which has been compiling the cost of buying all the items in this song for some 30 years.

"We were surprised to see such a large increase from a year ago given the overall benign inflation rate in the U.S.," says Jim Dunigan, an official in PNC’s wealth management division. In fact, this year's change in Twelve Days of Christmas index is the highest since 2010, when it jumped 9.2 percent.

In reality, the tongue-in-cheek index provides some real-life lessons in how inflation is measured and how these gauges can be temporarily thrown off by a few items with big price swings. Surprisingly, this index normally closely mirrors the primary inflation measure in the U.S. -- the Consumer Price Index. Where the CPI has risen 122 percent over the 30 years, the Twelve Days index is up 116 percent. Both average out to an annual 2.9 percent inflation rate.

But the Twelve Days of Christmas index soared this year because just three items -- Nine Ladies Dancing, 10 Lords a Leaping and four calling birds -- jumped in price by 10 to 20 percent. The prices of seven of the remaining nine items either fell or remained steady, while the final two rose by an average of 2.9 percent.

And, if you measured the cost of buying everything online, the price -- despite the Ladies, Lords and calling birds -- actually fell by 1.7 percent. (The bad news is that the True Love who needs to buy online would still spend a staggering $12,300 on shipping for a total outlay of $39,762. Blame the birds, says Dunigan. They're tricky to mail.)

Such is the nature of inflation indexes. They rise and fall depending on what products you measure and the weight those items have in the index. In the case of the Twelve Days index, an item's weight is reflected by its total cost. Thus when two of the three most costly items in the index rose by double-digits, and the third remained steady, it had a disparate impact on the overall measure.

It's worth noting that the CPI is weighted based on government surveys designed to reflect commonly-purchased goods and services. However, some economists argue that the index is flawed and often gives too much -- or too little -- weight to the items that real consumers buy. Indeed, in the 1990s, the CPI gave more weight to the cost of tobacco than the cost of computers, largely because the index hadn't updated its "shopping basket" since the time when personal computers became commonplace. 

Notably, the most heavily weighted item in this holiday inflation index is for Nine Ladies Dancing, which is calculated based on having nine members of the Philadelphia Dance Company arrive for a private performance. The total cost was $7,553, up 20 percent from $6,294 in 2012.

Seven swans a swimming was the second most costly item at $7,000. That cost was flat from 2012 to 2013, but the cost of shipping those swans dived to $10,500 from $10,850 in 2012, accounting for the dip in the Internet-purchased cost of the Twelve Days index.

Wondering what all these items cost on an individual basis? Here's the rundown:

One Partridge in a Pear Tree: $200 (down 2.4 percent from $205 in 2012)

Two Turtle Doves: $125 (no change)

Three French Hens: $165 (no change)

Four Calling Birds: $600 (up 15.4 percent from $520 in 2012)

Five Gold Rings: $750 (no change)

Six Geese-a-Laying: $210 (no change)

Seven Swans-a-swimming: $7,000 (no change)

Eight Maids-a-milking: $58 (calculated at one hour of minimum wage work, which has also not changed)

Nine Ladies Dancing: $7,552 (up 20 percent from $6,294)

10 Lords a Leaping: $5,243 (up 10 percent from $4,767)

11 Pipers Piping: $2,635 (up 2.9 percent from $2,562)

12 Drummers Drumming: $2,855 (up 2.9 percent from $2,775.50)

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