Posted on 12/17/2003 5:09:11 AM PST by general_re
PITTSBURGH, Dec. 8, 2003 – While stiff import competition is driving deeper discounts on merchandise sold in the United States, skilled labor cost is on the rise, resulting in a 16 percent increase in this year’s PNC Advisors Christmas Price Index – the biggest jump the Index has seen in its 19-year history.
Each year since 1984, PNC Advisors has provided a tongue-in-cheek economic analysis, based on the cost of the goods and services purchased by the True Love in the holiday classic, “The Twelve Days of Christmas.”
Indeed, the cost of the five gold rings dropped by 5.6 percent, and the pear tree is down a full 28.6 percent from last year. However, these discounts were offset by the dancers, pipers and drummers who have seen significant increases in the cost of their services over 2002.
“The Index reflects the broader trend of productivity growth in the U.S. economy that has driven prices lower on goods while allowing prices for services to rise modestly,” said Jeff Kleintop, chief investment strategist for PNC Advisors. “Whereas in the mid-1980s the cost of the goods in the song dominated the Index, the trend over time has been toward lower goods prices, such as the pear tree, and higher prices for skilled labor, such as the pipers,” he said.
“The abundance of cheap labor in countries such as China have contributed toward increased pressure on U.S. manufacturers to outsource their unskilled labor overseas, and evolve toward higher-skilled areas, to maintain profitability. Unfortunately, the unskilled Maids haven't managed an increase in price for their services in many years,” he added.
Two exceptions to this trend, however, are the swans and the calling birds, which cost significantly more this year. Unlike 2002, when swans took a significant dive in price, these graceful feathered friends have bounced back to their 2001 level of $500 a piece, up from $300 last year, according to the Philadelphia Zoo. The four calling birds are also flying high at $400, more than a 26 percent increase from last year. “The bird prices tend to be stable, except when supply and demand get out of sync, causing the prices to move dramatically,” said Rebekah McCahan, investment strategist who provides the research for the Christmas Price Index. “The low inventory of calling birds and swans this year, combined with a resurgence in demand, has boosted prices – a sign of consumer confidence returning,” she added. All told, the swans, geese, calling birds, French hens, turtle doves, and partridges cost over $4,100, representing about 25 percent of the overall Index.
As in the past, most items are more expensive to buy over the Internet, primarily due to the cost of shipping, which has gone up this year.
As part of its annual tradition, PNC Advisors also tabulates the “true cost of Christmas,” which is the total cost of all of the items in the famous carol, including all of the repetitions. The price tag for the 364 items this holiday season is $65,264, up from 2002’s true cost of $54,951. This increase of nearly 19 percent shatters the previous record increase of 8.4 percent that was achieved in 1987.
“We have seen a record increase in the 2003 Index, possibly indicating that the fears over deflation that we saw last year may begin to recede, as general price levels begin to pick up and the outlook returns to one suggesting the economic recovery may be sustainable,” said Kleintop.
(Excerpt) Read more at pncbank.com ...
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