IDEX Online Research: Jewelry Price Inflation Eases in October
November 28, 10(IDEX Online News) - Both retail and wholesale jewelry price inflation moderated in October, based on the latest price inflation data from the U.S. government’s Bureau of Labor Statistics (BLS). For the past five months, suppliers’ wholesale prices have been soaring at double-digit level.
In October, jewelry wholesale prices finally eased, and rose by a more moderate high single digit number. Similarly, jewelry retail price inflation also slowed in October, though it continues to run at a rate far less than wholesale price inflation.
Here’s what is most interesting about these measures of jewelry price inflation: the sharp rise in the price of gold – which was near $1,240 per ounce at the beginning of October and ended the month at $1,307 – was not reflected in jewelry prices, at either the wholesale level or the retail level of the distribution pipeline. October’s gold price spike was one of the largest monthly gains during 2010.
IDEX Online Research believes that the moderation of jewelry price inflation during October reflected the underlying softness of jewelry demand, especially during September, when specialty jewelers posted a sales decline of 1.5 percent, based on preliminary results from the Department of Commerce.
Here are the highlights of the U.S. government’s price inflation report for the month of October 2010:
· Retail jewelry and watch prices rose by 1.6 percent in October, modestly below last year’s average of 1.8 percent gain for the full year, and slightly below the 1.7 percent inflation rate for 2010 year-to-date.
Retail prices of watches fell by 0.9 percent in October. Retail prices of watches have fallen nine out of ten months year-to-date 2010.
· Jewelry suppliers’ prices rose by 9.1 percent in October, well above last year’s average of +3.3 percent but slightly below the 2010 year-to-date inflation rate of 9.3 percent.
Wholesale Prices Continue to Rise Faster Than Retail Jewelry Prices
For the past year, jewelry suppliers’ prices have been rising steadily and sharply, but jewelry prices at the retail level have generally shown little inflation. This has caused a margin squeeze, particularly among retailers. In August and September, retail jewelry prices finally begun to reflect the higher-cost goods that retailers are receiving from suppliers. However, in October, retail price inflation moderated significantly, as jewelers did not pass along higher wholesale prices to their customers.
The graph below summarizes both the Jewelry Consumer Price Index (green bars) versus the Jewelry Producer Price Index (red bars).
Source: BLS
At the wholesale level, a large portion of the industry’s price inflation pressure is coming from higher precious metals prices. Gold has sold for as high as $1,400 per ounce, and could be headed higher, according to some forecasters. We note, however, that the price of gold has pulled back modestly, as we write this.
Platinum has averaged between $1,500 and $1,700 per ounce for most of 2010. While this range is below the levels of just over $2,000 that were experienced in 2008, today’s prices are still well above historic platinum price levels over the past decade.
The table below summarizes the JPPI and the JCPI and their major components for October 2010 as compared to the same month a year ago.
|
The IDEX Online Research outlook for jewelry price inflation: retail and supplier prices are headed higher, despite a pause in demand in September and early October. As the global economy recovers, demand for precious metals for all producer and consumer sectors will increase. Further, though demand is choppy, 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.
The full analysis of the jewelry prices at the producer level and the consumer level in the U.S. 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.