IDEX Online Research: Jewelry Supplier Price Inflation Surges to Record Levels
October 22, 11(IDEX Online) – For the month of September 2011, jewelry supplier prices rose by a record 18.6 percent from the same month a year ago – September 2010. On a month-to-month basis, supplier jewelry price inflation was up by 2.3 percent, one of the largest monthly price gains on record.
Monthly swings are less meaningful, but may give an indication of the strength – or weakness – of the underlying factors that affect jewelry suppliers’ prices.
After nine months of 2011, jewelry supplier price inflation is up by 13.4 percent, an unusually high level.
September’s jewelry supplier price inflation rate of 18.6 percent was double the jewelry supplier inflation rate of 9.3 percent for the full year 2010, and it was multiples above 2009’s supplier inflation rate of 3.3 percent.
The graph below summarizes year-over-year jewelry supplier price inflation on a monthly basis.
Source: BLS |
Higher Precious Metal Prices Continued to Drive Inflation Pace
Jewelry suppliers’ prices of precious metals jewelry rose by a dramatic 21.5 percent during September 2011 versus the same month a year ago. This was notably above jewelry suppliers’ overall inflation rate for all jewelry and watches of 18.6 percent for the month, and it was a record level in the current post-recession recovery period.
On a month-over-month basis, jewelry suppliers’ prices for precious metal jewelry reflected inflation of 2.3 percent in September versus August. On an annualized basis, this would suggest that suppliers’ jewelry prices could rise by 27 percent or so. While we think that supplier price inflation won’t hit a 27 percent annual rate of gain, we also did not think it could hit a mid-to-high teen rate of inflation. Capitalism – supply and demand driven pricing – is sometimes unpredictable.
The graph below compares the jewelry supplier inflation rate for precious metals jewelry (gold columns) versus the overall jewelry supplier inflation rate for jewelry (red columns). These comparisons are year-to-year.
Source: BLS |
Watch Price Inflation Moderates After Early Summer Gains
Watch prices at the supplier level in September showed a moderate gain – +1.2 percent – when compared to the same month a year ago (September 2010). This level of inflation is reminiscent of inflation trends in 2009 and early 2010, when watch prices rose by a low single-digit level at the supplier level. However, in October 2010, watch price inflation suddenly disappeared, on a year-to-year basis, and was nearly non-existent for six months. Then, watch price inflation spiked for four consecutive months: April, May, June, and July 2011. In August, watch price inflation year-to-year declined to a much more modest gain of 1.1 percent, roughly in line with September.
On a month-to-month basis – September 2011 versus August 2011 – supplier prices of watches were flat. After nine months of 2011, watch prices are up a modest 1.2 percent year-to-date.
In recent months, watch demand and watch sales in the
The graph below shows year-to-year supplier price inflation for watches for the past twenty-four months.
Source: BLS |
Jewelry Retail Prices Moderate in September
Jewelry retail prices have been climbing steadily since November 2010, driven by both stronger consumer demand and higher supplier prices.
For the month of September 2011, retail jewelry prices – all categories of merchandise – rose by 7.5 percent over September 2010. This was one of the larger increases in inflation since the summer of 2008, just before the “Great Recession” hit with a vengeance in the 2008 holiday selling season.
On a month-to-month basis, though, retail jewelry prices fell by 1.8 percent, when comparing September 2011 to August 2011. Comparing the first nine months of 2011 versus the same nine-month period last year, retail jewelry prices are up by 8.3 percent. This is one of the largest gains on record.
The graph below summarizes year-to-year retail jewelry price inflation in the
Source: BLS |
Watch Prices Show Moderate Inflation
Retail and supplier prices of watches have tended to move together, with prices more or less flattish, both on a month-to-month basis and a year-to-year basis, over the past few years.
For the month of September 2011, retail watch prices rose by 3.4 percent from September 2010. That’s significantly above the level of last month’s inflation rate of +1.1 percent, and was also above the year-to-date (January-September 2011 / January-September 2010) inflation rate of 1.3 percent. When compared to the prior month of August 2011, watch prices in August were up by 0.1 percent.
Retail prices of jewelry, excluding watches, were up 8.1 percent in September 2011, when compared to September 2010 prices. When compared to the prior month – August 2011, retail prices of jewelry (only) declined by 2.0 percent.
The graph below compares the inflation rate for jewelry and watches (green bars), jewelry only (red bars), and watches (gold bars).
Source: BLS |
September Jewelry Inflation Causes Disparity between Retail & Supplier Prices to Widen
Bad news: retail jewelry prices, after rising faster than suppliers’ jewelry prices for the first eight months of 2011, fell in September, while wholesale prices continued their relentless pace upward. Thus, the gap between retail prices and wholesale prices narrowed, creating a new margin squeeze for jewelers.
The graph below summarizes the recent disparity between retail jewelry price inflation and suppliers’ jewelry price inflation on an annual basis. Since the mid-1990s, with only a few exceptions, suppliers’ jewelry prices have risen more rapidly than retailers’ jewelry prices. Thus, this has created a long-term margin squeeze that has plagued jewelers for years.
Source: US Dept of Commerce |