IDEX Online Research: Jewelry Producer Prices Up Sharply, But Retail Prices Nearly Flat

Driven by rising gold, platinum, and silver prices, jewelry producer prices rose by a double-digit level in April, as measured by the Jewelry Producer Price Index (JPPI).

In contrast, retail prices of jewelry rose by a miniscule amount, as measured by the Jewelry Consumer Price Index (JCPI).

Unfortunately, this has been the trend since early last fall: wholesale prices up, but retail prices nearly flat. Assuming that a typical retail jewelry store in America turns its inventory once a year, higher producer prices from last year will necessarily begin flowing through to retail prices very soon.

The alternative is simple: jewelers’ margins will be squeezed further, forcing some of them to go out of business. In short, the current dichotomy in inflation – high inflation among producers but low inflation at retail – cannot continue indefinitely.

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

Our outlook for inflation remains guarded. 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 untenable and 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.