Jewelry prices rose sharply in June 2007, as expected. This trend was a dramatic change from prior months when jewelry price inflation, both at the consumer and supplier level, had been declining.

 

• Jewelry Producer Prices +1.6 percent – Jewelry producer prices, as calculated by the U.S. Bureau of Labor, rose by 1.6 percent in June versus the same month last year, reversing a twelve-month trend of slowing price increases. In May, producer prices rose by a very modest 0.5 percent; thus June’s price inflation was more than three times as great as the prior month. Based on recent price trends of commodities, it was clear that we were at a bottom in May in terms of price inflation at the supplier level. 
• Jewelry Consumer Prices +6.0 percent – Jewelry consumer prices surged by 6.0 percent in June 2007 versus June 2006, reversing a four-month trend of moderating retail prices. June’s price gain was sharply higher than May’s 3.0 percent retail price increase, as reported by the U.S. Government. In part, jewelers may have used the lull in producer price inflation to raise prices in anticipation of higher prices this fall; in part, retail jewelers were using June as a “catch-up” period for prior supplier price increases that they have been unable to pass along in the past.

Our outlook calls for retail prices of jewelry to continue to climb this year, perhaps in the low to mid single digit range. Likewise, we expect jewelry supplier prices to rise, though probably only in the low single digit range. After experiencing declining prices for many years, inflation has finally dawned in the U.S. jewelry industry, a trend that is likely to continue for the foreseeable future.

 

June Jewelry Producer Prices Rise

After posting twelve months’ of a declining growth rate, jewelry suppliers’ prices to retailers rose in June. Jewelry producer prices rose by 1.6 percent over the same month a year ago, a sharp increase from the prior month’s 0.5 percent increase. Comparisons were relatively difficult a year ago, so this year’s supplier price inflation is very real, and is not due to an anomaly in the numbers.

 

The graph below summarizes jewelry producer price inflation since the beginning of 2006 on a monthly basis, year-over-year.

 

U.S. Producer Price Index U.S. Jewelry 2006 - 2007 % Change Year-to-Year Source:  BLS

 

Jewelry Retail Prices Surge in June

After posting a declining growth rate for most of 2007, jewelry retailers pushed prices sharply higher in June. Jewelry retail prices rose by 6.0 percent over the same month a year ago, according to U.S. Government figures released recently by the Bureau of Labor Statistics.

 

June’s price surge compares to a relatively modest +3.0 percent increase in retail prices in May 2007. Comparisons against last year were difficult; jewelry retail price gains in June 2006 were among the largest for the entire year. Thus, like jewelry producer prices, the surge in retail prices of jewelry was real, and it was not due to an anomaly in the math or the numbers.

 

The graph below summarizes retail prices of jewelry by month since the beginning of 2006. The percent change is based on comparisons to the same month a year ago.

 

U.S. Consumer Price Index for Jewelry U.S. Retail Jewelry & Watch Prices 2006 - 2007 % Change Year-to-Year Source:  BLS

Forecast: Continued Price Inflation for Jewelry

Jewelry demand correlates closely with economic growth cycles: when the economy is growing, jewelry demand typically rises sharply, and vice versa. In a true supply-and-demand economy, as demand increases, prices should rise.

 

Most economists are now calling for stronger-than-expected economic growth in the U.S. for the balance of 2007.

 

Thus, with a stronger economy and the potential for stronger demand, jewelers will be less likely to try to discount product to boost sales. Further, they may feel more confident about implementing retail price increases in an effort to recover prior supplier cost increases.

 

We have recently raised our forecast for jewelry sales in the U.S. market for 2007 to +4.0 percent, up from our earlier forecast of +3.5 percent. This is due to a stronger than expected economy both in the U.S. and globally.

 

We now expect jewelry retail prices to rise by at least 4 percent in 2007; supplier prices will likely increase by a lesser amount.

 

Jewelry retail prices in the U.S. fell during nine of the past eleven years. That won’t be the case in 2007.