BREAKINGVIEWS-Ben Bernanke is no holiday price Grinch

Mon Nov 26, 2012 11:17pm IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

By Richard Beales

NEW YORK, Nov 26 (Reuters Breakingviews) - Easy money isn't making this year’s holiday festivities too pricey. The cost of the "Twelve Days of Christmas" gifts, excluding swans, is up a below-average 2.6 percent. A Thanksgiving meal was under 1 percent more expensive in 2012, against a modest 2.2 percent rise in U.S. consumer prices in the year to October. Federal Reserve Chairman Ben Bernanke's policies aren’t bringing inflation that could dim the spirit of the season.

The cost of a 12-day, 78-gift collection in PNC Financial Services' tongue-in-cheek Christmas Price Index is up nearly 5 percent. That rises to more than 6 percent when including the song's repetitions, totaling 364 presents. But the bank's core measure, which excludes the volatile and expensive "seven swans a-swimming" item, is up considerably less than the 4.4 percent average increase seen since 1986.

The cost of a less esoteric shopping basket is more relevant. A 16-pound bird was the biggest contributor to the slight rise in the tab for last week's Thanksgiving feast to just under $50 for 10 people, by the American Farm Bureau Federation’s reckoning. But at around 3 percent, the increase in the cost of turkeys was modest compared to swans, geese and French hens (although less meaty partridges, turtle doves and calling birds were unchanged in price). Milk, cream and other staples were cheaper.

Executives from Wal-Mart Stores (WMT.N) talked a lot about "price investments" - meaning discounts - when the company released quarterly earnings earlier this month, and said inflation in some product lines is still countered by deflation in others. More scientifically, U.S. prices overall aren't taking off. Neither the headline CPI nor the core version excluding food and energy, which rose 2 percent in 12 months to October, look worryingly high or show any clear upward trend in the context of other 2012 readings.

The Fed's ultra-low interest rates and gigantic bond-buying programs are surely buoying bond prices and probably stocks, some commodities and other asset prices as well - perhaps including large, infrequently-traded birds. What's not obvious from either anecdotal or broad indications is any serious effect on day-to-day prices. That may come in future years, but for this holiday season at least Bernanke is no price Grinch.

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CONTEXT NEWS

- PNC Financial Services on Nov. 26 released its annual Christmas Price Index, pegging the cost of the gifts in "The Twelve Days of Christmas" at $25,431.18 this year, an increase of 4.8 percent over 2011. PNC attributed the increase to a drought-induced surge in the cost of feed for large birds.

- Excluding the volatile and expensive "seven swans a-swimming" component, the index is up 2.6 percent over last year, well below the average since 1986 of 4.4 percent.

- The American Farm Bureau Federation on Nov. 8 said the retail cost of a classic Thanksgiving menu was 0.6 percent higher this year than in 2011, at $49.48 for 10 people.

- The U.S. consumer price index rose 2.2 percent in the year to October.

- PNC release: link.reuters.com/sef34t

- American Farm Bureau Federation release: link.reuters.com/tef34t

- U.S. CPI report for October: link.reuters.com/zec83h - For previous columns by the author, Reuters customers can click on [BEALES/]

(Editing by Jeffrey Goldfarb and Emily Plucinak)

((richard.beales@thomsonreuters.com)(Reuters messaging richard.beales.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS BERNANKE/INFLATION

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