US Sales Buoy Industry
As rough and polished trading slackens, retail remains steady heading into the holidays.
Diamond trading slowed in September. Retail demand was mixed, with US sales growing but inflation creating concerns for consumers. The Chinese market remained quiet following lockdowns earlier this year. Midstream polished inventories rose, while the rough sector showed signs of weakness.
American shoppers were the backbone supporting the industry. US jewelry retail sales rose 17.5% year on year in August, reported Mastercard SpendingPulse, citing the latest month for which figures were available. Meanwhile, revenue across all product categories grew 0.3% in August over July, according to a separate report from the US Census Bureau. A strong job market outweighed the negative impact of higher consumer prices, the National Retail Federation (NRF) explained.
The Far East market had not yet recovered from the Chinese government’s recent Covid-19 measures. Retail in Hong Kong was still suffering the effects of the drop in tourism — especially Chinese visitors — though improved labor conditions lessened the blow. Sales of jewelry, watches, clocks and valuable gifts in the municipality jumped 28% year on year to HKD 4.08 billion ($519.4 million) for July, but this largely reflected the particular weakness of the same month in 2021.
Mainland China retail showed some signs of picking up, with revenues from gold, silver and jewelry up 7.2% year on year at CNY 26.8 billion ($3.82 billion) in August. Overall figures for the month benefited from a favorable comparison to a sluggish August 2021, media network CNBC quoted economist Hao Zhou as saying.
Polished prices declined between September 1 and 18. The RapNet Diamond Index (RAPI™) for 1-carat diamonds fell 2% for the period, while 0.30-carat stones decreased 0.3%. RAPI for 0.50-carat stones slid 1.1%, and 3-carat goods were down 0.9%. Inventories rose, with the number of unique diamonds on RapNet totaling just under 1.9 million on September 18 — 12% more than a year earlier.
India’s August rough imports were up 12% year on year at $1.36 billion, according to data from the country’s Gem & Jewellery Export Promotion Council (GJEPC), but polished exports slipped 7% to $1.88 billion. This was the second consecutive month in which those two metrics showed opposite trends, indicating a possible buildup of stockpiles among manufacturers.
Israel’s Economy and Industry Ministry blamed the geopolitical situation, stock-market declines and inflation for a 21% slump in the country’s polished exports for August, which totaled $271.9 million. “However, it is important to remember that August is a relatively weak month for the diamond industry,” said Ophir Gore, the nation’s diamond controller. “Over time, Israeli diamantaires are finding alternatives to Russian rough.”
An Uncertain quarter
The rough market weakened in September. Observers anticipated slower demand at the De Beers’ sight during the month, which was ongoing at press time. Sales at tenders and auctions were also soft amid uncertainty. Rough prices at Petra Diamonds’ September sale fell 4.5% on a like-for-like basis compared with June. “Subdued” demand in China led to relative pressure on prices for 0.75- to 5-carat rough, the company added.
The fourth quarter overall looks uncertain. Diwali in October is likely to have a temporary slowing effect on manufacturing and trading in India, while forecasts for the holidays point to modest gains over 2021.
“This holiday season, consumers may find themselves looking for ways to navigate the inflationary environment — from searching for deals to making trade-offs that allow for extra room in their gift-giving budgets,” said Michelle Meyer, US chief economist for the Mastercard Economics Institute. “New job creation, rising wages and lingering savings should have many consumers ready and able to spend.”