Global Markets Heading in Different Directions
The global diamond and jewelry markets around the world are showing interesting differences when broken down into their various parts. While the European market is still slow, and China is striving to catch up with sales levels seen until about a year or two ago, the United States is becoming increasingly robust after a six-year slowdown.
Meanwhile, India’s economy is showing the first signs that it could be heading higher following the election last May of Prime Minister Narendra Modi who is generally regarded as pro-business.
The European market is most worrying, although recent statistics suggest that the situation is improving. The European Central Bank has raised this year's eurozone growth forecast to 1.5 percent, up from 1 percent previously. ECB head Mario Draghi forecasts economic growth in the eurozone of 19 countries that share the euro currency would strengthen slowly to reach 2.1 percent by 2017.
With even Germany, long the engine of the European market, struggling to post strong growth figures, the ECB has resorted to unprecedented measures in a bid to stimulate the continent's economy. Germany's neighbor, France is heading for further stagnation and, to the south, Italy's growth is around zero, Spain and Portugal are not much better off, and Greece is mired in a profound economic downturn that austerity measures have apparently done little to help.
That has put the ball firmly in the European Central Bank’s court: how does it stop a fragile recovery stalling altogether. The ECB fears the eurozone countries could slip into deflation as a result of tough austerity measures implemented by many member states. Consequently, it began a belated quantitative easing program, as has been in place in the United States since the global financial crash of 2008. The plan is expected to see around 1.1 trillion euros injected into the eurozone economy between now and September 2016.
Meanwhile, in China, economic expansion is clearly slowing. After years of double-digit growth, economic growth dropped to 7.4 percent last year, and the government's target for 2015 is 7 percent. Exceptionally high by the standards of just about any other country, the decline in Chinese expansion is a concern both at home and abroad. For the diamond jewelry industry, a decline in buying power is also a concern: China imports around $2 billion of diamonds annually and turns them into retail sales of $9 billion.
The government is moving to restructure the economy, believing the country to be overly reliant on exports and wants to stimulate local demand. Meanwhile, regulations against the giving of luxury items – considered as bribe-giving to win lucrative alliances – remain in force and appear to have had an impact, in particular, on diamond-set watches and other high-end jewelry items.
The United States remains something of a mystery – seeing reasonable, but hardly spectacular, sales of jewelry. The jobless rate is falling as large numbers of new jobs are being created. The problem is, however, that they are not regarded as being well-paying positions, thus holding back the amount of disposable income available. Compounding that is the fact that wages are barely increasing.
Surging stock markets and rising house prices have created wealth, it would appear, for many, allowing them to open their pocketbooks and head for jewelry stores. But huge numbers of American households, despite falling gas prices which are putting money into peoples' pockets, are more concerned with dealing with high household debt levels and prefer to save than spend. Money saved on gas costs is not being spent, but carefully put away for a rainy day or to pay off debt.
U.S. specialty jewelry store sales declined on the year by 4 percent in January to a shade under $2 billion, which followed a smaller decline of around 2 percent from a year earlier in the first month of the year in jewelry and watch sales from all retail outlets to $4.5 billion.
US retail spending overall has been weak in the first two-and-a-half months of 2015. Analysts believe that low levels of wage rises – where they are being seen at all – are deterring consumers from taking a chance in buying today and having to pay in the future with salaries that may well be at the same level as today. Meanwhile, others say that the low retail spending figure are due to the harsh winter weather that kept people at home.