(IDEX Online News) – Jewelry price inflation in the U.S. market continued to moderate in March, for the second consecutive month. Commodity prices eased – the price of gold fell by 4.0 percent in March when compared to February, along with all other key jewelry commodities – so some supplier pricing pressure was removed.

 

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

 

Retail jewelry prices in March were only slightly above February levels. Retail jewelry prices have been bouncing up and down for several months, so March’s modest inflation was a welcome respite from prior months.

 

While inflation may have moderated in the jewelry distribution channel, the chasm between jewelry retail prices and jewelry supplier / producer prices remained wide. Essentially, jewelry wholesale prices continue to rise faster than jewelry retail prices; this results in a margin squeeze among retail merchants.

 

Jewelry Wholesale Price Inflation Moderates

In March, the Jewelry Producer Price Index (JPPI) stood at 216.2, flat versus February’s 216.2; a year ago, the JPPI stood at 193.6. Here is what this means:

 

·        Wholesale jewelry prices were flat on a month-to-month comparison basis: March versus February 2012.

 

·        Wholesale jewelry prices rose by about 11.7 percent on a year-to-year comparison basis: March 2012 versus March 2011. This is down from the inflation rates in both January and February 2012.

 

·        Wholesale jewelry prices were up 13.4 percent for the three months year-to-date 2012 versus the same period a year ago.

 

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

Source: BLS

 

Jewelry Retail Price Inflation Moderates in March

In March, the Jewelry Consumer Price Index (JCPI) stood at 169.6 versus February’s 168.6; a year ago, the JCPI stood at 161.0. Here is what this means:

 

·        Retail prices of jewelry rose by about 0.6 percent on a month-to-month comparison basis: March versus February 2012.

 

·        Retail jewelry prices rose by about 5.3 percent on a year-to-year comparison basis: March 2012 versus March 2011. The retail jewelry price inflation rate in March was the same as in February (+5.3 percent) and below January’s inflation rate of +6.8 percent.

 

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

Source: BLS

 

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 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, a number of other industries use precious metals. 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.

 

·        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 March 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.