February Jewelry Price Inflation Remains High with engagement rings being popular.

While the February JPPI (wholesale) inflation rate was under 14 percent, somewhat lower than prior months, it is still very high compared to historic levels in the low-to-mid single digit range.

Further, the February JCPI (retail) inflation rate of just over five percent, while more moderate than some months in 2011, is also running ahead of its historic low-to-mid single digit level.

The disparity between supplier price inflation and retail price inflation that characterized 2011 has continued into 2012, though at a slightly lesser rate. Here’s how this disparity in inflation rates between producers and retailers affects the American jewelry industry: the margin squeeze that specialty retail jewelers have felt since 2009 continues to manifest itself.

After being somewhat stable in late 2011, commodity prices – gold, silver, platinum – have moved higher in price. Precious metals prices correlate somewhat to the global economic climate since they are used in a wide variety of manufacturing processes. Further, geopolitical uncertainties cause investors to seek the historical safe haven of gold.

According to the latest forecasts from the OECD, the economies of most of the diamond-consuming countries are expected to grow modestly in 2012, though recent signs suggest a potentially more positive growth rate. This could lead to further disparity between retail jewelry prices and supplier prices.

When the global economy strengthens, precious metals prices will likely rise as demand solidifies. This will intensify the current margin squeeze that retailers are experiencing, unless retailers are able to pass along higher product costs.

The table below provides a summary of inflation rates in the U.S. jewelry industry for the following: 1) year-to-year price comparison for the month of February; 2) month-to-month price comparison for February versus January; and 3) two months of 2012 price comparisons versus the same two-month period in 2011.