Slowdown in diamond jewellery

Diamond jewellery demand in 2016 is likely to be affected by subdued global economic growth.

Led by a sharp decline in production of polished diamonds and jewellery in India in the second half of 2015, the global market in precious ornaments fell to $79 billion, from $81 bn the previous year. Indian diamond processors' inventory rose in the second half of the year to five to six months of their consumption equivalent, as against the normal one to two months. The developments in the Indian market are important since most of the rough diamonds ('roughs' in trade parlance) mined in the world are cut and polished in this country.

"The outlook for 2016 is driven by expectation of positive but subdued global economic growth, with a weakening of growth in emerging markets and a fragile recovery in advanced economies. Downside risks are expected to prevail. (Upside risk is sometimes upside for short. It is the extent to which the value of a security or other investment may increase beyond forecast levels. Downside risk is the opposite.) Among the top five consumer diamond markets in the world, the US is expected to continue to be the main driver of demand growth in 2016, sustained through moderately positive economic momentum and cautious consumer optimism," said Philippe Mellier, chief executive of the De Beers group, major supplier of rough diamonds to world markets.

India's diamond jewellery market fell nine per cent in 2015 to $3.6 bn, from $4 bn the previous year. In rupee terms, the decline was less, at Rs 21,100 crore in 2015 as against Rs 22,000 crore in 2014. Consumer demand was affected by a number of factors impacting overall spending.

"Diamond jewellery demand has improved since Diwali. Continuation in the improvement of demand would depend on macro-economic factors in India and abroad," said Dinesh Navadia, president, Surat Diamond Association.

Demand in the US rose five per cent from 2014, with economic recovery, more job creation and wage growth. The US is the world's largest market for diamond jewellery sales and increased its share of global polished diamond demand from 42 per cent in 2014 to 45 per cent in 2015.

Mellier said, "Despite 2015 being a challenging year for rough diamond demand, consumer diamond jewellery demand was robust. Encouragingly, the US and China continue to grow."