“Leaving Las Vegas”

Edahn Golan

The diamond industry came to the Las Vegas shows with moderate expectations. In ‎today’s economic climate, moderate expectations should be considered high, since all ‎prospects are viewed with caution. ‎
Therefore, in many ways the shows did not disappoint. The U.S. proved its worth as a ‎source of stability in the market. While India and China have been the growth drivers over ‎the past few years, it is still the U.S. that is the backbone of diamond demand, particularly ‎when developing markets soften.‎

And soften they have, at least in sentiment. India’s weak rupee, now hovering around 56 ‎to the dollar, has impacted domestic demand. China’s pace of economic growth is ‎slowing as the country transitions from an economy dependent on government spending ‎and exports to one driven by private consumption and investment. Hiccups in both ‎countries’ journeys were inevitable.‎

For varying reasons, the U.S. is the reliable big brother to other diamond markets. Its ‎maturity ensures that there is someone for everyone to sell to. Most significantly, the ‎economy is consumer driven. People primarily buy diamond jewelry to wear, whereas ‎consumers in China and India place greater emphasis on the investment potential of their ‎jewelry purchase – even as this is changing with the new, modern consumer in those ‎markets.

Thus, the message out of Vegas signaled that U.S. diamond demand is stable, with some ‎segments, like high-end luxury, doing better than others. ‎

Some at the shows suggested that the mood generally improves during an election year ‎as political campaigning brings economic promise, no matter how empty. Others ‎reasoned that while discretionary consumers were less conspicuous in their spending ‎during the recession, sensitive to the plight of their struggling peers, they have shed their ‎‎“guilt” and started to spend again.‎
‎“The high-end consumer did not go away during the recession, but for a time it was ‎almost considered bad manners to buy luxury,” one wholesaler commented to Rapaport ‎News. “That isn’t the case anymore.” ‎

A recent report by Unity Marketing, which monitors luxury spending, stressed that “high ‎earners not rich yet,” or individuals with annual incomes of $100,000 to $249,999, have ‎returned to the luxury space, after being missing in action since the recession began. ‎Indeed, there was positive feedback from the JCK Luxury and Couture shows to reflect ‎this.

Still, the strong trend is for more affordable price points and generic diamond demand at ‎the shows tended toward commercial SI stones. For the same reasons, there is good ‎demand for fancy shapes as price differentials from rounds has increased demand and ‎reduced supply. Cutters were encouraged to manufacture rounds instead of fancies in ‎‎2011, creating prevailing shortages of fancies.‎
Consumers are prepared to compromise on size or quality while design is playing an ‎increasingly important role in the sales pitch. Wholesalers and retailers are scrambling to ‎find their niche to accommodate this development.   ‎

U.S. demand for diamonds is therefore segmented with strong high-end and low-end ‎markets, while the majority middle market understandably continues to struggle.‎
‎ ‎
Consumer confidence fell 5.5 percent to a four-month low in May, according to the ‎Conference Board. Consumers were less positive about current business and labor ‎market conditions, and more pessimistic about the short-term outlook. However, they ‎were more upbeat about their income prospects, which should help sustain spending, the ‎Conference Board explained. ‎

Similarly, last Friday’s May jobs report did little to spur confidence. The Labor ‎Department reported that just 69,000 jobs were created during May, the lowest monthly ‎tally this year, as the unemployment rate rose slightly to 8.2 percent. Stock markets fell ‎with the news as the JCK show was opening, perhaps causing some to think twice about ‎their market assessments. Having rallied during the first quarter, the Dow Jones industrial average had a tough month in May shedding 9 percent. ‎
Looking at these numbers the diamond industry takes its cues.

As weaknesses in India and China have started to appear and crises in Europe continue ‎to flow, dealers turned their attention back to the U.S. It was therefore natural that their ‎expectations for Vegas rose. The diamond industry has grown accustomed to mixed ‎messages. While the bombardment of negative news continues to influence market ‎sentiment, business is being done, and this was reflected in Vegas.‎

Therefore, while suppliers and buyers did not leave Vegas disappointed, the market is not ‎booming. Rather they left with the reminder not to overstate their expectations. In today’s ‎economic environment, moderation may be the new splurge – even in the city of excess. ‎
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Source Rapaport