Luxury is a bright spot amid a cautious outlook for the fourth quarter.
The diamond industry woke up in November after holiday-related shutdowns. Indian cutting factories reopened following Diwali, a period during which they traditionally shut for two or three weeks. However, sentiment was mixed ahead of the peak shopping season.
US consumer demand was generally strong, but inflation and higher interest rates raised concerns about spending, especially in the middle and lower segments of the retail market. China had still not recovered from this year’s coronavirus lockdowns — a worrying reality for traders ahead of the important Lunar New Year, which falls out on January 22, 2023.
The best segment was the high end, with luxury jewelers registering solid results. Polished prices declined; the RapNet Diamond Index (RAPI™) for 1-carat diamonds slid 2.4% between November 1 and 20. The index for 0.30-carat stones slipped 0.1%, 0.50-carat goods saw a 1.2% drop, and the 3-carat category went down 1.6%.
Polished exports tumble
Shipment data mirrored the slowdown, with India’s polished exports slumping 26% year on year to $1.89 billion in October, according to the country’s Gem & Jewellery Export Promotion Council (GJEPC). Israel saw a 24% decrease in its own year-on-year polished exports, hitting a total of $432.8 million after returns of unsold goods, the country’s Economy and Industry Ministry reported.
The rough market also slowed as companies in Surat reduced their production. De Beers brought in $450 million at its sales cycle in late October and early November, down from September’s $508 million, reflecting a “traditionally…quieter time for the diamond midstream,” the miner said.
The sector remained somewhat split between rough above 1 carat, which was weak, and goods capable of producing polished melee, which saw stronger sales. Many of these smaller rough stones are of Russian origin; while some have entered the market in recent months, this flow has “all but ceased,” tender house Trans Atlantic Gem Sales (TAGS) stated in a report on its November sale.
“This in part explains why the prices of smaller-sized rough have remained relatively firm, while 3-grainer [0.75-carat] and larger sizes have seen a greater level of correction over the past few months,” said the Dubai-based company.
Jewelry growth falters
The focus for the industry was the Thanksgiving and Black Friday shopping days, which traditionally kick off the fourth-quarter holiday season in the US. Growth in jewelry sales showed signs of dropping off, with Mastercard SpendingPulse’s data for the category turning negative after many months of increases. Revenue for the segment fell 3.8% year on year in October, the market-intelligence provider said.
Long-term prospects looked positive. Global sales of luxury goods will rise 21% to around EUR 1.4 trillion ($1.44 trillion) this year compared with 2021, according to a report Bain & Company released in cooperation with Italian trade association Altagamma. “Even in the face of recessionary conditions expected across leading economies into 2023, the…analysis forecasts further expansion in sales and market value for luxury goods through the coming year and decade,” the report said.
The brightest spot for the diamond industry was the top-end brands. Sales at Swiss conglomerate Richemont’s jewelry maisons — Cartier, Van Cleef & Arpels, and Buccellati — rose 24% year on year to EUR 6.34 billion ($6.58 billion) for the six months that ended September 30. This supported demand for high-quality melee diamonds — used in watches and expensive high jewelry — and the rough that produces them, dealers said.
In contrast, many mid-market players struck a more cautious note, with online retailer Brilliant Earth reducing its full-year sales outlook due to “macro headwinds and the anticipated promotional environment,” according to CEO Beth Gerstein.
Overall, projections for the holiday were optimistic without being wildly so.