IDEX Online Research: May Jewelry Price Inflation: Producer Prices Rise Sharply
July 01, 10
The dichotomy continues: jewelry producer prices continue to rise sharply, but retail price inflation remains very modest. It is a trend that is suggests serious trouble for the U.S. jewelry industry, if it continues.
· The Jewelry Producer Price Index (JPPI) rose by 10.4 percent in May, the second largest gain this year.
· The Jewelry Consumer Price Index (JCPI) rose by a very modest 2.9 percent in May, the largest gain this year.
· For the five months year-to-date, the JPPI is up 9.5 percent and the JCPI is up 1.2 percent.
There is only one conclusion: margins are being squeezed in the distribution pipeline between the suppliers and the retailers. The JPPI is based on prices charged to retailers by suppliers; however, there is room for discounting and adjustments that may not be reflected in the JPPI. So, either the suppliers are getting push-back from retailers, or the retailers are getting push-back from shoppers. Either way, margins are being squeezed in the distribution channel. If the trend continues, suppliers and / or retailers will be put in an untenable position: profits will evaporate and they will go out of business.
The table below summarizes the JPPI and the JCPI and their major components for May 2010 as compared to the same month a year ago.
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Our outlook for inflation remains cautious. As the global economy recovers, demand for precious metals for all producer and consumer sectors will increase. Further, there are already signs that consumers are returning to their former buying habits for discretionary goods, including jewelry. This means that demand will increase, and price increases will inevitably follow. In addition, the lack of retail price inflation in the face of high producer price inflation is unsustainable. We don’t look for price rollbacks at the supplier level, so retail prices are headed higher – it’s only a matter of time.
Click HERE for more detailed information about jewelry prices at the producer level and the consumer level in the U.S.