"In the aftermath of a long credit-driven boom, it would not be surprising to see turmoil in financial markets, slowing real growth and temporarily rising inflation," the BIS said in its annual report.

"While difficult to predict, their interaction does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."

The Basel-based bank added that the current "consensus view is still that the global economy will slow only modestly further in 2008" and that growth continued to be strong in the euro zone, Japan, and major emerging market economies.

Often called the central bank of central banks, the BIS said during its last fiscal year central banks worldwide reacted to the financial and monetary policy situation differently, and that given their countries' different economic situations, a "one size fits all" monetary policy can't necessarily be predicted or suggested.

The bank said that with inflation rising, a global bias toward higher interest rates was probably appropriate. Higher interest rates can cool inflation, but run the risk of lower growth.

"Between inflation and the liquidity crisis, this is one of the toughest markets I've seen," said Dreman, who oversees about $15 billion in Jersey City, New Jersey. "But it's not a market you sell into. Any losses you take by being too early will be more than offset by buying cheaply."

The Conference Board blamed the pessimism on the short-term outlook for the US economy as well as weakening business and job conditions.

The figures tell a similar story to the University of Michigan's Index, which hit a 28-year low in May.

"There is a fear the economy is in a recession or going into one and people may find their jobs in jeopardy," said David Coard from the Williams Capital Group in New York.

"When you talk to people on the street they seem to be really being squeezed at the pump and the supermarket while their income isn't keeping up."

"Consumers' inflation expectations, fuelled by increasing prices at the pump, are now at an all-time high and are likely to rise further in the months ahead," said Lynn Franco, director of the Conference Board Consumer Research Center.

"As for the short-term outlook, the Expectations Index suggests little likelihood of a turnaround in the immediate months ahead."

The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.

Meanwhile, retail sales fell by 0.4 percent in December, the worst showing in six months, the Commerce Department reported. Consumer confidence has plunged, reflecting the worsening housing slump and a lingering credit crisis.

For inflation, the year ended on a more positive note, with wholesale prices falling by 0.1 percent in December. That reflected decreasing costs last month for gasoline and other energy products. It was a significant slowdown after prices had soared by 3.2 percent in November, which had been the biggest one-month increase in 34 years.

The combination of rising inflation pressures and a weak economy represent a dilemma for the Federal Reserve over whether to cut rates to boost economic growth even at the risk of making inflation worse.

True Loves will have to pay a bit more for the five Gold Rings this year, as the jewelers who provide the prices for the rings report having no choice but to pass increased prices along to consumers as the price of gold continues to rise.

"The cost of the Gold Rings in this year's Christmas Price Index reflects the general trend of increasing commodity prices in the Consumer Price Index, including gold," said Dunigan. "In addition, increased fears about inflation and the value of the dollar may have led investors to turn to gold as a safer place to invest their money." The price of five gold rings now totals $395, a 21.5 percent increase over 2006 prices, but still nowhere close to 1989 prices, when the five Gold Rings hit an all-time high of $750.

Milkmaids Benefit from Minimum Wage Increase

As the only unskilled laborers in the Christmas Price Index, the eight Maids-a-Milking make minimum wage, and have not had a raise since 1997. This year, Congress increased their wages by 13.6 percent; bringing the cost of eight Maids-a-Milking for one hour of work to $46.80. The True Love will have to reach deeper into his pockets for the milkmaids in 2008 and 2009, as well - Congress has already approved continued increases to the minimum wage for the next two years.

The cost of most performers in the index - the Drummers Drumming, Pipers Piping and Lords-a-Leaping - rose a modest 3 to 4 percent, due primarily to an increase in the performers' compensation, reflecting the current labor market in which the unemployment rate is still below 5 percent. Only the price for the Ladies Dancing was unchanged this year, according to Philadanco, a modern dance company in Philadelphia.

Food Prices Are For the Birds

Among the feathered friends in the Christmas Price Index, the most notable increase was a 20 percent change in the price for six Geese-a-Laying, provided by the National Aviary.

"For True Loves planning to serve a Christmas goose - or six - for a holiday meal, this item will be a bit more expensive," said Dunigan. "Food prices have increased over the last year, which has not impacted birds like Turtle Doves and Partridges, but has had an impact on birds traditionally served as food, like Geese."

Most of the other bird prices in the index remained even with last year's rates, thanks to steady supply and demand for Partridges, Turtle Doves, French Hens and Swans. Aside from the Geese-a-Laying, only the Calling Birds will cost more in 2007. PNC prices the Calling Birds from a national pet store chain, and prices for Calling Birds (or canaries) were up 25 percent this year, thanks to higher demand and increased shipping costs for retailers. 2007: Most Expensive Christmas Ever

For those True Loves who prefer to do their shopping online, PNC Wealth Management calculates the cost of The Twelve Days of Christmas gifts purchased on the Web. This year, the trends identified in the traditional index are repeated in the Internet version, with overall growth of 3 percent, very close to the 3.1 percent in the traditional index. This year, the Internet index is very similar to the traditional index. For example, the price of gold is significantly higher online in 2007 compared to 2006. And, as with the traditional Christmas Price Index, bird prices are mostly even with or, in some cases, down a bit from 2006 levels. In general, Internet prices are higher than their non-Internet counterparts because of shipping costs.

As part of its annual tradition, PNC Wealth Management also tabulates the "True Cost of Christmas," which is the total cost of items gifted by a True Love who repeats all of the song's verses. This holiday season, very generous True Loves will pay more than ever before - $78,100 - for all 364 items, up from $75,122 in 2006. This 4 percent increase is about even with last year's 3.5 percent increase.