Wednesday, December 4, 2013

How the common Christmas Gifts you buy helps keep the inflation rate lower than it otherwise would be...

The Wall Street Journal keeps tabs on the prices of common Christmas gift items and compiles a Gift Index that measures the change in prices of those gifts over time.  Looking at the accompanying graphic below, you can see the prices of those commonly given gifts have gone down over time (RED line):
At a time when overall inflation has been very low, price tags on items that people typically give as gifts have been stagnant or falling. Prices for clothing, shoes, watches and other apparel, for example, were down 0.2% in October from a year earlier, according to the Labor Department. For small appliances—toasters and the like—they fell 1.6%. Toy prices were down 5.6 
Indeed, an equal-weighted index of gift prices, put together by The Wall Street Journal and including the above items as well as ones like technology products, books and sporting goods, was down 2.5% in October from a year earlier. That represented one of the steepest drops since early 2011, when a weak global economy was weighing on prices.
The BLUE line represents the change in price of most other goods consumers typically buy (as measured by the Cleveland Fed's "Median Consumer Price Index").

Source: Wall Street Journal

I e-mailed the writer of the article and asked him what percentage of the items in the market basket he used were imports. He estimated around 50%.

Looking at the list of categories of gifts I would guess it to be much higher (Toys, Clothes, Shoes???).

In economic terms, we could say that we are not just importing these tangible goods but what we are really importing is low prices.  Because the price of imported goods are included in the Consumer Price Index this has help keep the official US inflation rate lower than it otherwise would be.

That is a good thing, right???

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