(IDEX Online News) – Retail prices for jewelry in the U.S. market fell by just over 2 percent during July, when compared to the same month a year ago, according to the latest data from the U.S. Bureau of Labor Statistics. This was only the second time in more than two years that retail prices of jewelry have declined.

 

The full analysis and statistics on jewelry industry inflation for July 2012 is available to IDEX Online Research subscribers and IDEX Online members here.

 

Further, wholesale jewelry price inflation continues to moderate. This is the third consecutive month that wholesale price increases have been in the single digit range, after posting double-digit increases for almost every month during the past two years.

 

Inflation pressures for finished jewelry – both at the wholesale level and at the retail level – have abated due to the lack of price inflation of major components of jewelry including polished diamonds, gold, platinum and silver.

 

Further, retail price deflation of jewelry is also tied to consumer demand, which has weakened in recent months. Retail sales of jewelry have been tepid since the beginning of 2012, a trend that is likely to continue as long as consumers’ uncertainty levels are high. The current climate of uncertainty among consumers is being driven by the upcoming presidential election, a faltering economy, the lack of job security, a yo-yo stock market and a weak housing market. When consumers are uncertain, they tighten their purse strings.

 

Jewelry Wholesale Prices Show Modest Gain in July

In July, the Jewelry Producer Price Index (JPPI) stood at 215.5, down modestly from June’s 215.8. A year ago, the JPPI stood at 204.0. Here’s what this data means:

 

·        Wholesale jewelry prices softened slightly by 0.1 percent on a month-to-month comparison basis: July versus June 2012. As the graph below illustrates, there has been little jewelry price inflation on a monthly basis since the beginning of 2012; prices have been relatively stable.

 

·        Wholesale jewelry prices rose by about 5.6 percent on a year-to-year comparison basis: July 2012 versus July 2011. This inflation rate is down substantially from the double-digit inflation rates in the first quarter of 2012, and it is only the third single-digit inflation rate in almost two years.

 

·        The graph below summarizes the JPPI over the past two years.

Source: BLS

Jewelry Retail Prices Down Modestly in July

In July, the Jewelry Consumer Price Index (JCPI) stood at 164.0 versus June’s 166.3. A year ago, the JCPI stood at 167.6. Here’s what this means:

 

·        Retail prices of jewelry declined by 1.4 percent on a month-to-month comparison basis: July versus June 2012.

 

·        Retail jewelry prices dropped by 2.1 percent on a year-to-year comparison basis: July 2012 versus July 2011. Retail prices of jewelry have shown no significant inflation since mid-2011.

 

·        The graph below summarizes the JCPI over the past two years:

Source: BLS

 

Inflation Abates Further in July

 

After record levels of inflation in 2011, jewelry price inflation in 2012 has finally cooled.

 

The table below provides detailed inflation / deflation rates for jewelry components as well as inflation rates at various levels of the jewelry distribution channel in the U.S. jewelry industry. The following data is shown: 1) year-to-year price comparisons for the month of July 2012 versus July 2011; 2) month-to-month price comparisons for July 2012 versus June 2012; and 3) seven months year-to-date 2012 price comparisons versus the same seven-month year-to-date period in 2011.  

Source: Various Markets

  

Jewelry Inflation Outlook: Moderating Inflation in 2012

Our outlook for jewelry price inflation remains unchanged: jewelry prices are expected to move modestly higher at all levels of the distribution channel throughout 2012. However, the rate of inflation is expected to be well below 2011’s torrid pace, both at the supplier level and at the retail level.

 

It would be easy to forecast inflation for the jewelry industry if all of the commodities involved in the forecast were used exclusively by the jewelry industry. While that may be the case for polished diamonds, precious metals are used by a number of other industries. Further, gold is an international currency that plays in a financial arena of its own.

 

·        Jewelry Industry Long Term Outlook – Demand from emerging economies such as India and China will help fuel sales of jewelry in those nations. Thus, the longer-term outlook for jewelry demand is positive.

 

·        Global Economic Outlook for 2012 – The latest OECD data continues to point to moderate economic growth with a “cautious” outlook in the next 12-18 months. This is a revision from a more positive outlook earlier this year.

 

·        Financial Markets Outlook for 2012 – With continued volatility in the world’s stock markets and uncertain valuations related to stocks, bonds and other hard assets, investors may seek the safe haven that gold offers. Despite predictions by others that gold will hit $2,000 this year, we are not ready to embrace those forecasts. Indeed, after seven months, gold has declined slightly in price.

 

The bottom line: inflation is headed higher over the longer term, but at a more moderate rate. Jewelry suppliers and retailers should use periods of weakness in commodity prices to add to their inventory.

 

The full analysis and statistics on jewelry industry inflation for July 2012 is available to IDEX Online Research subscribers and IDEX Online members here. Click here for more information on how to subscribe or become a member.