Among the fun things to look forward to at this time of year is PNC’s annual (37 years now!) Christmas Price Index, in which they calculate the prices of the twelve gifts from the classic song, “The Twelve Days of Christmas”. The highest increase year-over-year was for the two turtledoves, up 50% to $450, which contrast to a few of the other avian gifts: swans, calling birds, and a partridge will cost you the same this year as last…as will minimum wage milk maids. This year’s index accounts for cancellations of many live performances: the unavailability of dancing ladies, leaping lords, pipers, and drummers means that the total cost of these gifts is down over last year. How far down, though, is a matter of measurement. If you were to buy just one of each of the gifts – one goose, one ring, one French hen, etc. – you’d pay 58.5% less than last year, for a grand total of $16,168.14 (USD). But you can also measure by the full cost of all the gifts – both the turtle doves, all the geese, none of the performers – to arrive at grand total for 2020 of $105,561.80, down just 38% since 2019. Or, and I’m assuming this is based on the one-of-each option, PNC also provides a “core” index, which excludes the Swans-a-Swimming, the price of which is apparently the most volatile. The core index for 2020 costs $3,043.14, down 88.2% from 2019.
So, the same index has three different year-over-year price changes. That provides a perfect segue into a discussion of the critical thought, and careful consideration required before relying on Price Indices for decision making, planning, and policy purposes…there are many available from which to choose, including the overall, oft quoted, Consumer Price Index (CPI). This is not to say that price indices are not a valuable tool – just that care needs to be exercised in choosing and using them.
Twice a year, we undertake a comprehensive market survey of rental office and warehouse space; the summary results include average net rental rates, realty taxes and operating expenses, and gross rental rates. As part of our analysis, we look at the relationship between the All-Items CPI and the total for realty taxes and operating costs (RTCAM), over a five-year period. The CPI is a measure of the cost of a certain “basket of goods”, and as such generally measures the rate of inflation – which is expected to be reflected in the costs to operate a building. The fact that the cost to operate a building includes a different basket of goods than that required to run a household – more cleaning and heating, fewer sneakers, school supplies, and food items – makes it unsurprising that, while these two measures usually move generally in concert, there can be significant variation. This year, where costs have shifted up and down across various sectors, particularly highlights the challenge of relying on the CPI as a surrogate for other baskets of good: the five-year ratio between CPI and RTCAM, describing how the RTCAM moved for each 1 percentage point change in the CPI, varied from a 1.14 percentage point decrease in office RTCAM in Saint John NB, to a 1.01 percentage point increase in Fredericton, with Moncton, St. John’s NL, and Halifax falling at varying points along that range. December’s survey includes both office and warehouse space in Halifax, and there is a differential between the ratio of CPI to RTCAM for the two sectors, with office RTCAM coming in at 0.59 to 1 percentage point change in CPI, and warehouses coming in at a ratio of 1.2 to 1.
PNC says about their index:
The PNC Christmas Price Index® is an annual tradition which shows the current cost for one set of each of the gifts given in the song “The Twelve Days of Christmas.”
It is similar to the U.S. Consumer Price Index, which measures the changing prices of goods and services like housing, food, clothing, transportation and more that reflect the spending habits of the average American.
The goods and services in the PNC Christmas Price Index® are far more whimsical, of course. And most years, the price changes closely mirror those in the U.S. Consumer Price Index. This year, the approach to PNC’s CPI takes into account the sociopolitical environment brought on by the pandemic by using the Index to provide an analysis of current market conditions, while including the impacts of COVID-19 as highlighted by the data.
It’s a fun way to measure consumer spending and trends in the economy. So, even if Pipers Piping or Geese-a-Laying didn’t make your gift list this year, you can still learn a lot by checking out why their prices have increased or decreased over the years.
It’s definitely worth checking out. And if you’re interested, we publish the summary results of our market surveys on our website and through email distribution. Watch for them in the New Year – or contact us to subscribe. Wishing you and yours all the best for the holidays, from all of us at Turner Drake & Partners Ltd.
Alex Baird Allen is the Manager of Turner Drake’s Economic Intelligence Unit. If you’d like more information on market research or our semi-annual Market Survey, you can reach Alex at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email