(IDEX Online) – Supplier jewelry prices and retail jewelry prices fell in May 2012, when compared to April. Suppliers’ jewelry prices fell by 0.8 percent, while retail jewelry prices fell by 1.6 percent, when measured against the prior month.

 

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

 

Further, all sub-components of inflation – including individual jewelry, watch, and precious metal jewelry as well as key commodity components including diamonds, gold, silver, and platinum – declined in price during May, when compared to April price levels.

 

This is the first month in years that all components of jewelry inflation have fallen on a month-to-month basis.

 

On an annual basis – comparing May 2012 versus May 2011 – supplier jewelry prices are still up from last year, but at only a single digit level. Retail prices in May dropped to levels below last year. Further, except for a couple of anomalies late in the last decade, this is the first time that retail jewelry prices have fallen on a year-to-year basis since 2005.

 

The moderating inflation trends are primarily the result of the lack of inflation this year for polished diamonds and precious metals. In addition, there has been some weakness in consumer demand for jewelry. April jewelry sales were almost flat versus last year, though it had much more to do with the timing of Mother’s Day sales than a sudden drop in consumer demand. Still, shoppers have been bombarded by an unusually large number of uncertainties – high unemployment, a weak economy, geopolitical saber rattling, and the vitriol associated with the upcoming presidential election. When consumers feel uncertain about the future, they tighten their purse strings.

 

Jewelry Wholesale Prices Soften in May

In May, the Jewelry Producer Price Index (JPPI) stood at 215.1, down notably from April’s 216.9. A year ago, the JPPI stood at 197.3. Here is what this data means:

 

·        Wholesale jewelry prices dropped 0.8 percent on a month-to-month comparison basis: May versus April 2012.

 

·        Wholesale jewelry prices rose by about 9.0 percent on a year-to-year comparison basis: May 2012 versus May 2011. This inflation rate is down notably from the double-digit inflation rates in the first quarter of 2012, and it is the first single-digit increase in a year and a half.

 

·        Wholesale jewelry prices were up 11.9 percent for the five months year-to-date 2012 versus the same period a year ago.

 

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

Source: JBT

 

Jewelry Retail Prices Deflate in May

In May, the Jewelry Consumer Price Index (JCPI) stood at 164.5 versus April’s 167.1. A year ago, the JCPI stood at 164.9. Here is what this means:

 

·        Retail prices of jewelry dropped by about 1.6 percent on a month-to-month comparison basis: May versus April 2012.

 

·        Retail jewelry prices declined by 0.2 percent on a year-to-year comparison basis: May 2012 versus May 2011. This is the first year-to-year decline since 2005, except for a couple of anomalies in the past six years.

 

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

Source: JBT

Jewelry Inflation Outlook: Moderating Inflation in 2012

Our outlook for jewelry price inflation remains unchanged: jewelry prices are expected to move higher at all levels of the distribution channel throughout 2012 and perhaps beyond. 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 points to moderate economic growth with a “positive” outlook for stronger growth in the next 12-18 months. However, there is some divergence among the growth of certain economies, especially given the current fiscal problems in Europe. Further, virtually all of the world’s “growth” economies are showing some signs of moderation, especially in the past couple of months.

 

·        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. This level would represent a mid-teen price increase. We see investor movement toward income-producing assets, and a move away from assets that do not produce income or an inflation hedge, such as gold.

 

The bottom line: inflation is headed higher over the longer term, but perhaps 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 May 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.