IDEX Online Research: June Jewelry Price Inflation Running Above Average

June’s jewelry price inflation rate in the U.S. market was above historic trends, both at the supplier level and at the retail level.

·        Retail jewelry prices rose by 2.5 percent in June, well above last year’s average of 1.8 percent level for the full year, and above a 1.4 percent inflation rate for 2010 year-to-date.

·        Suppliers’ jewelry prices surged by 10.2 percent this year, far above last year’s average of +3.6 percent and above 2010 year-to-date’s inflation rate of 9.6 percent.

What is driving rising price inflation in the U.S. jewelry industry? We see three key factors, in addition to a number of other more minor factors:

·        Gold prices have continued to rise for most of the year, though they have pulled back modestly in July. Gold is a major component used in jewelry fabrication.

·        Jewelry demand is strengthening. In a capitalistic system, supply and demand determine prices. As demand solidifies, prices tend to rise.

·        Retail prices appear to be reacting to higher supplier price inflation. For several months, there has been a dramatic dichotomy between retail price inflation and supplier price inflation for jewelry: supplier prices have been surging, but retail prices have held steady. Now, it appears that those higher supplier prices are finally working their way through the pipeline to the consumer. Several major chains have announced retail price hikes this year, and at least one chain indicates that it is likely that it will raise prices prior to the 2010 holiday selling season.

The table below summarizes the JPPI and the JCPI and their major components for June 2010 as compared to the same month a year ago.

Our outlook for jewelry price inflation: retail and supplier prices are headed higher. 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. Thus, retail prices are headed higher – it’s only a matter of time.

Click here for a detailed analysis and more information about wholesale and retail jewelry prices in the U.S.