Jeweled Skulls
2009-11-08
2009-03-26
2009-03-23
Jewelry Price Inflation Continues to Moderate
IDEX Online Research: Jewelry Price Inflation Continues to Moderate
(March 23, '09, 17:02 Ken Gassman)
Jewelry producer prices haven’t budged upward for several reasons, including the following:
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Retail jewelers have cut back on re-ordering merchandise. As a result, jewelry suppliers are offering a variety of price-based incentives to move merchandise into retailers’ stores. These price-based incentives are reflected in the modest inflation rate at the jewelry supplier level.
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There is still a large backlog of high-cost goods in the distribution pipeline that suppliers need to pass on to their customers. But the good news is that the pressure is off – suppliers’ costs have moderated, so they aren’t being forced to continue to raise prices in the face of a weakening environment of consumer demand.
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We believe that suppliers will likely hold off on any significant price increases near term for one key reason: retail jewelers simply won’t accept higher prices in the current recessionary environment.
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Because the wholesale community is so fragmented, no one supplier has pricing power. We’ve seen some panic pricing by suppliers who are trying to move goods – at a loss, if necessary – to raise cash. In that kind of environment, any supplier who tries to raise prices will lose business.
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Prices for both precious metal jewelry and gemstone jewelry have moderated. The graph below compares the JPPI (red bars) to inflation for precious metals (gold bars); gold had been the primary driver of precious metals inflation in 2007 and most of 2008. In January 2009, gold prices pulled back modestly, but have risen – and held steady at about $900 per ounce in February and March month-to-date. In our opinion, $900 gold has been priced into goods produced by jewelry manufacturers, and therefore producer prices aren’t likely to rise notably from current levels.
(March 23, '09, 17:02 Ken Gassman)
Suddenly, the talk on the street has been all about inflation. A year ago, inflation was very real. Then, along came a recession, and the talk turned to deflation. Since early 2009, the talk has turned back to inflation.
With interest yields declining, investors are running for inflation hedges – typically commodities. That’s pushed up the price of oil and other commodities, including gold, in the past couple of weeks.
Does anyone really know what comes next? Speculation by Wall Street suggests that inflation is real and here to stay. We probably don’t need to remind you that these are the same folks who got us into the recessionary mess we’re currently in. Do they know of what they speak? Only time will tell.
But we do know what’s happening in the jewelry industry: inflation has been cooling since mid-2008, both at the consumer level and the producer level. Only retail prices of watches continue to inch upward at a faster rate; other jewelry commodity prices have cooled, and are up minimally year-over-year. At the producer level, prices barely crept up, and the precious metals category posted a modest decline in prices.
With the sharp rise in gold prices over the past few weeks, inflation could return to the jewelry industry in 2009. Previously, we had predicted that weak demand would hold prices down, but if investors continue their run on commodities, inflation is just around the corner for jewelers.
Jewelry producer prices haven’t budged upward for several reasons, including the following:
*
Retail jewelers have cut back on re-ordering merchandise. As a result, jewelry suppliers are offering a variety of price-based incentives to move merchandise into retailers’ stores. These price-based incentives are reflected in the modest inflation rate at the jewelry supplier level.
*
There is still a large backlog of high-cost goods in the distribution pipeline that suppliers need to pass on to their customers. But the good news is that the pressure is off – suppliers’ costs have moderated, so they aren’t being forced to continue to raise prices in the face of a weakening environment of consumer demand.
*
We believe that suppliers will likely hold off on any significant price increases near term for one key reason: retail jewelers simply won’t accept higher prices in the current recessionary environment.
*
Because the wholesale community is so fragmented, no one supplier has pricing power. We’ve seen some panic pricing by suppliers who are trying to move goods – at a loss, if necessary – to raise cash. In that kind of environment, any supplier who tries to raise prices will lose business.
*
Prices for both precious metal jewelry and gemstone jewelry have moderated. The graph below compares the JPPI (red bars) to inflation for precious metals (gold bars); gold had been the primary driver of precious metals inflation in 2007 and most of 2008. In January 2009, gold prices pulled back modestly, but have risen – and held steady at about $900 per ounce in February and March month-to-date. In our opinion, $900 gold has been priced into goods produced by jewelry manufacturers, and therefore producer prices aren’t likely to rise notably from current levels.
2008-05-29
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