Amada Agati:  

In this edition of "#AddingAlpha," we explore some key insights from PNC's 2022 Christmas Price Index. For the 39th year in a row, PNC has calculated the cost of Christmas.

Always a light-hearted take on the Bureau of Labor Statistics' Consumer Price Index which measures the averagechange in prices consumers pay for goods and services over time, the PNC version applies its own analysis to procuring true love's 12 gifts based on the traditional Christmas song "The 12 Days of Christmas."

Using sources such as dance and theater companies, hatcheries, pet stores, and others, we build the trends each year. This year, it's a whopping $45,523.27 to buy all 12 days' worth of true love's gifts from the classic holiday song "The 12 Days of Christmas," or a cumulative $197,071 if you really want to make an impression by buying all 364 gifts in the repeated verses of the song.

On a percentage basis, the index is up about 10.5% versus 2021 levels. It's the third biggest increase in the index's history. With the BLS's own version of the Consumer Price Index hitting the highest levels in 40 years, no question, inflation has been a major pain point for consumers, the Fed, and investors all year long.

While the Fed is just starting to gain some ground in the inflation battle, it's still running at 7.7% in the most recent reading, far above the Fed's 2% long-run target.

While many times our specialty gift basket price trends track or mirror what the broader economy is experiencing, this year has seen an even bigger outsized impact, running some 300 basis points ahead of broader CPI trends.

True love is definitely going to have to shell it out this year, just like the U.S. consumer will have to dig into any built-up reserves, because borrowing costs have increased significantly, too.

The gold rings are the single biggest mover in the index this year, and, naturally, my all-time favorite gift. Gold rings are up
a whopping 39.1%. And even though the spot price of gold is down 3.2% year to date, it really reinforces trends we're seeing in the broader services economy --both strong premiums and pricing power, especially when it comes to jewelry.

The exotic pet categories are all up substantially again this year after a record-setting year in 2021. Higher food and labor prices are increasing the cost of raising the birds, but accelerating trends toward backyard farming and, dare I say, farm-to-table continue unabated.

The cost to shop online for all of these gifts are up a lot, too, with the Internet version of the index up 8.9% this year. True love isn't going to get much of an online deal, unfortunately.

No doubt we're still feeling the continued supply chain disruptions and the additional specialty packaging, handling, and care that goes with transporting all of this precious cargo. Despite our notes and pleas to Amazon this year, free shipping still isn't available for livestock purchases.

Maybe next year, we'll have to head to the metaverse to drive those costs down. At the end of the day, consumer behavior is the drumbeat for the U.S. economy. With 70% of U.S. GDP tied to consumption in some way, shape, or form, consumer health really is a critical driver for the markets and the economy.

We continue to see U.S. consumers hanging in there despite the many macro head winds swirling, but are definitely seeing a behavioral shift from goods to services and experiences.

The Christmas Price Index is no different, as the 10 lords a-leaping saw one of the largest increases, at just over 24%. So keep an eye on guiding stars like retail sales, savings rates, and consumer sentiment as indicators of not only the success of this holiday season, but the market's path forward.