Jewelry demand in the U.S. remains robust, despite possible economic storm clouds on the horizon.  While Federal Reserve governors agonize over interest rates and inflation, the rest of America has gone shopping. 

 

For the month of July, U.S. jewelry sales rose a sharp 9.4 percent over the same month a year ago.  For the year-to-date period, U.S. jewelry sales are up 8.3 percent.  This compares to total U.S. retail sales (ex-automobiles), which were up 8.2 percent in July.  Year-to-date, total retail sales in the U.S. are up 9.4 percent over the first seven months of next year. 

 

The real question is this:  what drove robust July retail sales?  Gasoline prices were near their peak.  Interest rates were climbing.  There was no seasonal event driving sales.  Price-based promotions cooled in the summer heat.  Geopolitical tensions erupted into a war in the Middle East.  Consumer confidence, never a good predictor of retail demand, was headed down.  And yet, American consumers went to the malls and shopped.

 

Americans are resilient.  Shopping is a form of recreation for U.S. consumers.  As long as they have the money, they will go shopping.  When they feel the worst, they spend the most.  Shopping is a cultural balm for Americans. 

 

Luxury Goods Demand Strong

Americans’ demand for luxury goods has remained consistently solid, with gains in the mid-single digit range.  Jewelry demand has been somewhat more volatile.  But the trend line for jewelry demand – versus other luxury goods – has been solidly upward, as the graph below illustrates.

 

In fact, for the past three months, jewelry sales gains have outpaced sales gains among all categories of luxury goods in America, as the graph below illustrates. 

 

Mall Jewelry Sales Tracking with Broader Trends

Sales of jewelry in malls have been tracking closely – though at a slower pace – with specialty jewelers’ results for much of this year.  Based on specialty jewelry sales as a leading indicator, we believe that mall jewelry sales should perk up from June levels, the last available data. 

 

The graph below tracks mall jewelry sales versus specialty jewelers’ sales.  While the pace of mall sales has lagged the robustness of specialty jewelers’ sales, the demand curve is similar.

 

Outlook:  Solid Retail Sales Gains Possible for Balance of Year
Even the economic forecasters were surprised at the sustained strength of U.S. retail and jewelry sales. 

With lower gasoline prices in the U.S. – down in September by more than 30 percent from their summer peak – as well as strong employment and wage gains, American consumers appear ready to spend their way to Christmas.  While the housing market has weakened, the bubble has not burst nationally.  Further, recent stock market gains have made up for some of the lost momentum in the housing market. 

 

Thus, the news remains positive:  economists continue to call for a slowing pace of economic growth, but not a collapse.

 

IDEX Online Research’s Proprietary Jewelry Sales Forecast Still Very Positive

IDEX Online Research’s proprietary jewelry sales forecast model for the U.S. market remains strong, with predictions of solid gains in jewelry demand for 2006.  This mathematically driven model uses a mix of historical performance, economic data, and other projections to produce a sales forecast for U.S. jewelry demand.

 

After weighing the negative factors – high energy prices, inflation pressures, rising interest rates, and others – with the positive factors – low unemployment, moderate wage gains, and falling gasoline prices – our latest forecast calls for jewelry sales to rise by about 7 percent for the full year.  Last month, the IDEX Online forecast model was predicting a 6 percent gain in jewelry sales for 2006.  Thus, the recent jewelry strong sales data has had a positive impact on the mathematical model. 

 

While monthly jewelry sales comparisons are difficult in August against very robust gains in August 2005, the comparisons are easy for the balance of the year.  The sales comparisons are especially easy against September and October of 2005, when much of the East Coast was reeling from the ravage of several hurricanes which caused economic dislocation and a severe run-up of gasoline prices. 

 

In short, it won’t take much for jewelry sales to maintain their current momentum through the end of the year.

The graph below summarizes our latest forecast for jewelry sales gains in the U.S. market for 2006.  Even though there are only five months left in the year, the majority of the industry’s sales are yet to come, with 40 percent of jewelers’ annual sales generated in the all-important fourth calendar quarter of the year.