By Michael L. Lahr, Rutgers Economic Advisory Service (R/Econ™)

Black Friday and Cyber Monday have passed, but all reports are not yet in. Adobe Analytics reports that online sales on Black Friday hit a new nationwide record, striking a level 2.3% higher than a year prior, while Sensormatic Solutions reports in-person shopping rose by 2.9%. Sales on Cyber Monday were nearly 24% higher than on Black Friday, representing 5.8% growth over its 2021 equivalent. Alas, 6.3% inflation in the prices of nonfood items likely nullifies this record in real terms, although some reports suggest that e-commerce prices might not have followed suit. So, gifting prospects seem to be rather dreary for this time of year, and an investigation into inflation’s pervasiveness is clearly in order. For a seasonal focus, the American Farm Bureau Federation’s Thanksgiving Dinner Costs and the Christmas Price Index produced by PNC Financial Services seem an appropriate starting point. One highlights the cost of food; the other the cost of holiday gifts—albeit those from the Christmas carol, “The Twelve Days of Christmas.” These latter gifts no doubt seem somewhat more whimsical than the electronics, smart-home items, audio equipment, toys, and sporting goods that were sought by gift-givers during recent holiday seasons. So, the discussion of the Christmas Price Index is followed by more pertinent information.

The Farm Bureau publishes the cost of a Thanksgiving Dinner using data it gathers at a nonrandom sample of stores across all states plus Puerto Rico and supplemental information from the U.S. Department of Agriculture. Since 1986, Farm Bureau’s volunteer shoppers have been pricing an ample dinner for ten people without invoking promotional coupons or the like. The meal includes a 16-pound turkey, 14 ounces of stuffing, three pounds of sweet potatoes, twelve rolls with butter, a pound of peas, twelve ounces of fresh cranberries, a carrot-and-celery veggie tray, two pumpkin pies, a half pint of whipping cream, a gallon of milk, and other sundry items. In 2018, the Farm Bureau updated this meal by adding four pounds of ham, five pounds of russet potatoes, and a pound of green beans.

Until recently, the price of a Thanksgiving dinner had been stable, particularly from 2011 through 2020 during which the total cost of the non-updated rendition of the Thanksgiving dinner around $49 and the updated version around $61. In 2021, however, the updated dinner surged by 14.3% and in 2022 the price of turkey (a little more than a third of the dinner’s cost) rose by 20.7% as that same meal rose by 18.3%. Still, in 2022, the growing cost of a typical Thanksgiving dinner outpaced the average price rise of food at home during the period, 12.4%.

Food price rises within New Jersey were steeper in the southern parts of the state than in the northern region over the past year (16.6% versus 10.4%). Note that food, more generally, comprises about 13.7% of all consumer spending nationwide. So, food is a large component of household spending, but it is also basic part of consumer spending with very little of it ever substituted by other household purchases. Also, like basic resource commodities such as energy resources, food prices both fall and rise. Prices of manufactured goods are far stickier, i.e., once they rise, they do not falter by much if at all. Much of the price rise in food goods over the past two years is associated with fuel prices that are embodied in the refrigeration and logistics of getting the food to our homes. Thus, we could anticipate some relief in food and energy prices when actions in Ukraine settle down.

This is not the case with the basket of goods and services in the Christmas Price Index. This index is calculated by determining the change in the True Cost of Christmas, the cost of the 364 gift items mentioned in the song “The Twelve Days of Christmas” that “my true love” gives over the course of Christmastide (from Christmas Day on December 25 to the day before Epiphany, on January 5th). Some of the sets of gifts are given many times, e.g., a total of 36 colly birds[1] are given over the twelve days. It contains the costs of a variety of goods (i.e., gold rings, a pear tree, and birds of various species) and wages of both skilled (i.e., dancers and musicians) and unskilled labor (i.e., milk maids). PNC secures prices from the same source each year, many in metropolitan Philadelphia. What is rather surprising about this index is that it often closely reflects trends in the broader economy. Over the past year, however, the True Cost of Christmas rose by 9.8% to $197,071.09 and the year prior it rose by 5.4%.[2] This compares with the 7.7% national rise in the Consumer Price Index (CPI) from October 2021 to October 22, although just 6.0% in north and central New Jersey while 7.8% in southern New Jersey.

Although holiday humor was the foundation of the Christmas Price Index, it is also likely that it was developed as an attempt to track the change in costs associated with gift-giving during the holiday season. In part, this is because the U.S. Bureau of Labor Statistics, which publishes the CPI, does not release the detail required to track prices of most traditional gifts. It naturally tends to elicit detail for goods and services that comprise the largest shares of consumer spending: shelter; food, beverages, and tobacco; energy commodities and services; vehicles and transportation services; and medical care and related commodities, which when combined account for about two-thirds of all consumer spending. In fact, apparel is the only “normal” gifting category it does publish regularly. That is, it does not publish information regularly on the prices of electronics and audio equipment, toys and games, sporting goods, Christmas décor, books, candy, or self-care items. And, of course, it is almost impossible to place a value on homemade items, in part because we tend to value such sentimentality more as we age.

So where do we consumers stand this holiday season? It is clear that the holiday spirit is alive and well, but we’ll feel the pinch of higher prices. Still, the National Retail Federation expects holiday shopping to keep pace with inflation, rising by 6%-8% above 2021 levels. Through experience, we’ve collectively become savvier in coping with online retailers, who, subsequent to ordering over the past two years, revealed some items we’d ordered were either out of stock, on back order, or needed extended delivery times, such that gifts were not received until well after the holidays had passed if they were shipped at all. So, holiday shoppers seemed to have gotten off the blocks earlier than usual this year having already completed over half of all holiday shopping. Moreover, Deloitte’s 2022 Holiday Retail Survey suggests that 35% of consumers’ gift-giving budgets will be spent at bricks-and-mortar options, up from the 28% they reported in 2020. So, local Christkindlmarkts and other winter markets in or near New Jersey, like Peddler’s Village in Lahaska, Pennsylvania, should be fully revitalized. Also discount stores are likely to be a prime target for shoppers as we look for ways to “outsmart” inflation.

A prime concern, compared to the last two holiday seasons, is that inflation and the pandemic combined have tapped savings of most mid- to low-income households. And, like during the past two years, we are tending to use credit cards to make gift purchases. The Federal Reserve Bank of New York reports that credit card balances have risen 15% compared to a year ago. Other research suggests that buy-now-pay-later plans are also substantially more popular this year. So, fellow consumers, let’s be careful out there! Make sure to gift within your means, even if most of the gifts are for yourselves.

[1] This often erroneously written or sung as “calling birds.” Colly birds are European blackbirds, which are songbirds about the size of a robin that are sooty- or grimy-looking (hence, “colly” as in “collier”).

[2] PNC reported in 2020 that the Total Costs of Christmas dipped substantially that year as the total costs did not include any of the entertainers due to COVID-19 restrictions on live performances. Further their “Core” index excludes the highly variable and quite expensive Swans-a-Swimming gift. At nearly $13,980.00, only the Ten Lords-a-Leaping (actually, male ballet dancers each performing for an hour) are more expensive than the swans ($13,124.93) and just marginally so at that.

Many criticisms have been leveled at the Christmas Price Index. That by Fulcrum Inquiry (2011) is among the most interesting.