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The Index Explained

The PNC Christmas Price Index® shows the current cost for one set of each of the gifts given in the song "The Twelve Days of Christmas."

It began 28 years ago when the chief economist at PNC Bank decided to figure out how much it would cost to buy each of the gifts. Little did he know, he was starting an economic tradition that continues to this day.

The PNC Christmas Price Index® is similar to the Consumer Price Index, which measures changes in prices of goods and services like housing, food, clothing, transportation, and

A Partridge in a Pear Tree

more that reflect the spending habits of the average American.

The goods and services in the PNC Christmas Price Index® are far more whimsical. And most years, the price changes closely mirror those in the Consumer Price Index. 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, you can still learn a lot by checking out how their prices have gone up and down over the years.

It all started 28 years ago as a way to engage clients of PNC's predecessor, Provident Bank, during the traditionally light holiday weeks. What hatched as the creative brainchild of the bank's then chief economist has since grown into one of PNC's most popular and anticipated economic reports.

TRENDS: HOW THE INDEX HAS CHANGED SINCE 1984

Over the years, trends have emerged, and the PNC Christmas Price Index® (CPI) has often increased or decreased at a rate consistent with the other CPI, the Consumer Price Index, a measure of inflation produced by the U.S. Department of Labor.

Maid a milking

Three factors have largely driven changes in the index over the past 28 years:

  • The Internet makes it easier to find the gifts from the song online, but these goods and services tend to be expensive, mainly due to added shipping and handling costs.
  • The price overall has increased while the price of goods has slowed.
  • Fuel costs have a major effect on the cost of shipping. And, as we know, fuel prices have been especially volatile over the last few years.

James P. Dunigan Executive Vice President Managing Executive, Investments PNC Wealth Management

In his role as managing executive of investments for The PNC Financial Services Group, James Dunigan is responsible for the investment strategy, equity research, equity management, investment services and investment advisor research groups for the open architecture platform of PNC Wealth Management. Dunigan is also responsible for the development and execution of investment policies, strategies and tactics.

Rebekah McCahan Vice President Investment Strategist PNC Wealth Management

Rebekah McCahan serves as a member of the Investment Strategy team for PNC Wealth Management and Institutional Investments. She is responsible for developing asset allocation models, directing asset allocation changes, analyzing new investment instruments for consideration in client accounts, and helping to create quarterly and monthly investment outlooks and reviews. She is also responsible for gathering prices for the annual PNC Christmas Price Index®.

E. William Stone Senior Vice President Chief Investment Strategist PNC Wealth Management

Bill Stone is senior vice president and chief investment strategist for The PNC Financial Services Group. He is responsible for leading PNC's Investment Strategy team of analysts in monitoring many factors that influence the direction of domestic and international financial markets. He is responsible for defining the asset allocations and portfolio strategies throughout the organization to advise individual and institutional investors.

What is the Christmas Price Index? What is the True Cost of Christmas? Why did PNC start tabulating the Christmas Price Index? Who is the holiday shopper at PNC? Where does McCahan do her shopping? What has changed since 1984? Will shoppers spend more than ever before . . . again? In which year could a shopper afford to be a scrooge?
The PNC Christmas Price Index® shows the current cost for one set of each of the gifts given in the song "The Twelve Days of Christmas."
The True Cost of Christmas is the cumulative cost of all the gifts when you count each repetition in the song so it reflects the cost of 364 gifts.
It all started 28 years ago as a way to engage clients of PNC's predecessor, Provident Bank, during the traditionally light holiday weeks. What hatched as the creative brainchild of the bank's then chief economist has since grown into one of PNC's most popular and anticipated economic reports.
Since 1986, Rebekah McCahan of PNC Wealth Management has handled our shopping duties, putting a price tag on French hens, maids a-milking, gold rings and all the other items in the PNC CPI. She has evaluated some distinctive economic trends along the way.

This year, the National Aviary in Pittsburgh provided the cost of some of the birds in the song, including the partridge, doves, geese and swans. National pet chain PetSmart provided the price of the calling birds, or canaries.

The pear tree price came from Waterloo Gardens, a Philadelphia nursery. Gordon's Jewelers provided the cost of five 14-carat gold rings, and Philadanco, a modern dance company in Philadelphia, offered the price of ladies dancing. The Pennsylvania Ballet gave the price of the lords a-leaping. Prices for the musicians in the song "the drummers and pipers "were provided by a Pennsylvania musicians union.

Lastly, maids a-milking are the only unskilled laborers in the Index, and as such, they reflect the minimum wage.

Year after year, the sources for the prices remain the same for the most part to ensure consistency, but they have changed on occasion due to changes in the market or business landscape.

Many things. First off, the Internet. Today, it's easier for us to find the goods and services listed in the song online. This convenience comes at a price, however: Goods and services from the survey that are purchased online tend to be more expensive than those purchased in a more traditional transaction, mainly due to added shipping and handling costs.

Second, over the last 28 years, the price of services in general has increased, while the price of goods has slowed. In the 1984 PNC Christmas Price Index®, goods were by far the more expensive component of the Index "today it's services. The cost of entertainment, in particular, has greatly increased over the last 25 years. As a result, the nine ladies dancing have seen a 300% increase in performance fees.

Also related to services, in 2007, federal laws increased the minimum wage and gave the maids a-milking their first raise since 1997. The wage increased again in both 2008 and 2009, and is now holding steady at $7.25 per hour.

Third, fuel costs. As fuel prices go up and down, they have a major effect on the cost of shipping and, as we all know, 2011 has been an especially volatile year.

Looks like it, but that's because inflation usually makes the PNC Christmas Price Index® a little more expensive each year. The underlying inflation in this year's core PNC CPI (where the volatile cost of swans is excluded) is benign: up only 0.7%. The True Cost of Christmas (the cumulative cost of all the gifts when you count each repetition in the song) measured even wider fluctuations over the years. In 2003 we had the largest jump in our history, 16.0%. Although this year's increase of 4.4% is not as dramatic, it is the most expensive year ever at $101,119.84 "higher than last year by $823.80

The cheapest cost of Christmas in dollars occurred in 1995, when the True Cost of Christmas was only $51,000.
A Partridge in a Pear Tree

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The Index Explained

PNC is proud to continue this tradition of educating students of all ages on the basic principles of economic fluctuation.

Dear Educators and Students:

Each year, the PNC Christmas Price Index® is used in classrooms as an entertaining, simple way to introduce basic economic concepts. The change in the prices of Christmas gifts, year after year, provides an excellent lesson on inflation and other economic trends. Plus, similarities to the U.S. Consumer Price Index make it a fun and easy way to study economic indicators.

Drummers Drumming

For 2011, PNC has created a website with a magical train journey to help deliver the information. The updated site includes several pages of animated gifts, an interactive chart and an explanation of how the PNC Christmas Price Index® was determined.

These self-contained activities from The Stock Market Game™ give you everything you need to use the PNC Christmas Price Index® as an effective teaching tool.

The Stock Market Gameâ„¢, a program of the SIFMA Foundation for Investor Education (www.sifma.org/education), is a 501(c)3 educational organization dedicated to fostering knowledge and understanding of the financial markets for individuals of all backgrounds.

Ladies Dancing
LESSON PLAN IN ENGLISH LESSON PLAN IN SPANISH

About PNC Bank

The PNC Financial Services Group, Inc. ("PNC") provides investment and wealth management, fiduciary services, FDIC-insured banking products and services and lending and borrowing of funds through its subsidiary, PNC Bank, National Association, which is a Member FDIC, and provides certain fiduciary and agency services through PNC Delaware Trust Company. PNC does not provide legal, tax or accounting advice.

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Calling Bird

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