Economic Bulletin

RAPAPORT…
Producer Price Index Up Slightly

The Producer Price Index (PPI) for Finished Goods rose 1.1 percent in September, reversing a 1.4 percent decline in August, according to figures released by the Bureau of Labor Statistics of the U.S. Department of Labor. All of the individual categories of finished goods, as well as intermediate and crude goods, underwent a modest price increase, compared with the mixed results observed in July and August of this year. Finished consumer goods – minus foods and energy – experienced their fourth consecutive month of 0.2 percent growth.

During the third quarter of 2007, the finished goods index rose at a seasonally adjusted annual rate (SAAR) of 1.4 percent. This is a slower rate of growth than during the second quarter, when the index climbed at a 6 percent SAAR. The Bureau of Labor Statistics attributed the slower growth in the third quarter to declining prices for finished energy goods, which sank at a 1.5 percent SAAR for the three-month period ended in September. Before seasonal adjustment, the PPI for finished goods rose 1 percent in September to 167.4. Over the one-year period from September 2006 to September 2007, finished goods prices went up 4.4 percent.

Gold Reaches Record Prices As Dollar Declines

Gold’s dollar price has gone up 20 percent, with futures for December delivery rising $8.40 to $762.20 per ounce on the Comex division of the New York Mercantile Exchange. The weakening dollar helped drive gold to the highest prices since 1980, as demand from investors looking for a hedge against economic uncertainty increased. The World Gold Council lowered its forecast for India’s gold consumption by 25 percent in anticipation of the impact of gold prices.

However, silver futures fell 4.8 cents to $13.85 per ounce. The price of oil has shot up due to ongoing political instability in the Middle East. By midday on October 16, oil had topped a record price of $88 per barrel.

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, recommended that investors buy gold for security against deepening financial turmoil in the United States. Some analysts are predicting a gold price of $800 per ounce in the near future. David Holmes, director of precious metals sales at Dresdner Kleinwort, said that it is difficult to predict the highs and that there is widespread caution among investors and consumers in the face of the continuing upward momentum.

Additional reporting © Dialog NewsEdge.

United States Net Account Down

For August, the overall net diamond account – net polished imports plus net rough imports – fell 39 percent to $298 million.

Polished diamond imports into the United States increased 10 percent to $1.32 billion in August. Rough imports fell slightly from $43 million to $42 million. Net rough imports in August fell 44 percent to $5 million. Polished exports rose 42 percent to $1.03 billion, while rough exports climbed 9 percent to $37 million.

Year-to-date, rough imports are up 7 percent to $534 million, but rough exports are up 28 percent to $319 million. For the year, net rough imports fell 13 percent to $215 million.

For the year 2007 overall, the drop in net diamond account numbers has a visible impact. While year-to-date polished imports are up 7 percent to $11.8 billion, polished exports are up 16 percent to $7.1 billion, resulting in a 4 percent drop in net polished of $4.7 billion.

Belgium Net Diamond Account Falls

Belgium’s polished diamond exports fell 3.6 percent to $989.68 million in September 2007, the Antwerp World Diamond Center (AWDC) reported.
A steep decline occurred in Belgium’s polished imports, down 17.3 percent to $746.37 million, causing the country’s net polished exports — polished exports less imports — to drop 95 percent to $243.31 million for the month.
Rough imports to Belgium rose 4.3 percent to $834.46 million, while rough exports fell 17.5 percent to $817.75 million. The country’s net rough imports — rough imports minus exports — stood at $16.71 million, up from being in the red $191.82 million one year ago.

The country’s September net diamond account — net polished exports less net rough imports — fell 28 percent to $226.6 million.

Belgium’s polished exports to the United States fell 15.2 percent to $232.49 million for the month, while those to Israel increased 9.3 percent to $101 million.

From the start of 2007 up to now, polished exports from Belgium have grown 19.8 percent to $8.46 billion and polished imports have risen 12.5 percent to $7.6 billion. For January through September 2007, the net polished export figure jumped 156 percent to $621.87 million.

Year-to-date rough imports have risen 5.5 percent to $7.23 billion, and exports have risen 10.7 percent to $7.85 billion. Net rough imports dug deeper into the red, declining 182 percent to $857.01 million.

But when subtracting net rough imports from net polished exports, Belgium’s year-to-date net diamond account rose 170 percent to $1.47 billion.

Japan’s Polished Imports Rise

Polished diamond imports into Japan rose 1.2 percent in August to $61.54 million. This increase reversed 12 months of continual drops in Japan’s diamond imports. In the first eight months of 2007, the polished imports fell 15.4 percent to $594.82 million.

South Africa’s July Rough Exports Down

South Africa’s exports of rough diamonds fell 17 percent to $146.18 million (ZAR 997.06 million) in July 2007, according to data published by the country’s Department of Trade and Industry. The world’s third largest producer of rough diamonds by value, South Africa exported 997,959 carats of rough diamonds in July. This marks a decline of 40 percent from one year ago.

Rough imports rose 1 percent to $92 million, bringing the nation’s net rough exports – rough exports less rough imports – down 37 percent to $54.17 million.

South Africa’s polished exports dropped 7 percent to $55 million, and polished imports rose 68 percent to $14.32 million in July. Net polished exports — polished exports less imports – fell 19 percent to $40.7 million. The country’s July net diamond account – net rough exports plus net polished exports – fell 30 percent to $94.87 million.

During the year to date, however, polished exports rose 24 percent to $356.3 million, and polished imports climbed 45 percent to $72.32 million, contributing to a 20 percent rise in net polished exports to $368.22 million.
South Africa’s rough exports increased 4 percent to $981.79 million in the first seven months of the year. Rough imports grew 26 percent to $555.93 million. Net rough exports dropped 16 percent to $425.86 million.

For January through July, South Africa’s net diamond account declined 2 percent to $794.09 million.

Angola Diamond Exports Reach $1.2 Billion

Angola’s revenues from diamond sales reached $1.2 billion in 2006, Jornal de Angola reported. The newspaper quoted Hélder Marques, sales director of the country’s diamond marketing branch, Sodiam, as saying the country sold 9.4 million carats during the year.

The figures were slightly inflated from those published by the Kimberley Process earlier this year, which placed Angola’s diamond exports at $1.13 billion from 9.17 million carats, making it the fifth largest producer by value in the world. Reportedly, about 8 million of these carats were industrial grade stones.