{"id":16179,"date":"2022-07-11T14:52:29","date_gmt":"2022-07-11T09:22:29","guid":{"rendered":"https:\/\/gjepc.org\/solitaire\/?p=16179"},"modified":"2022-08-18T14:48:26","modified_gmt":"2022-08-18T09:18:26","slug":"macroeconomic-uncertainly-tempers-diamond-jewellery-demand-expectations-for-h2-2022","status":"publish","type":"post","link":"https:\/\/gjepc.org\/solitaire\/macroeconomic-uncertainly-tempers-diamond-jewellery-demand-expectations-for-h2-2022\/","title":{"rendered":"Macroeconomic Uncertainty Tempers Diamond & Jewellery Demand Expectations For H2 2022"},"content":{"rendered":"\n

Diamond industry analyst Paul Zimnisky<\/strong> sheds light on how the global economy is impacting diamond and jewellery sales and reveals expectations for the second half of the year.<\/em><\/h4>\n\n\n\n

In H1 2022, central banks around the world began to rein in the massive amounts of financial liquidity provided during the pandemic and they are under pressure to continue to do so due to multi-decade-high inflationary pressures.<\/p>\n\n\n\n

For instance, in mid-June, the US\u2019s Federal Reserve raised its Federal Funds interest rate target by 0.75% to a range of 1.50-1.75% \u2013 it was the first time the Fed increased rates by >0.50% since 1994. In March and May, the Fed raised rates by 0.25% and 50%, respectively \u2013 with the March hike being the first since December 2018.<\/p>\n\n\n\n

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Paul Zimnisky<\/figcaption><\/figure><\/div>\n\n\n\n

Current conditions have led The World Bank to downgrade its 2022 global real-GDP growth forecast to 2.9% from a previous 4.1% noting that \u201chigh global inflation accompanied by tepid growth (could result in a scenario) reminiscent of the stagflation of the 1970\u2019s.\u201d The Bank is forecasting global growth of 3.0% in 2023 and 2024, which compares to the recent high-water mark of 5.7% in 2021.<\/p>\n\n\n\n

Stagflation, an economic scenario where growth is slowing while inflation is rising, squeezes consumers and it will impact diamond and jewellery consumption, especially the longer it persists.<\/p>\n\n\n\n

During a recent Richemont analyst presentation, the company\u2019s storied chairman, Johann Rupert, candidly said \u201cin 1987, I saw stagflation in America\u2026 (and I can tell you) it\u2019s a nightmare for industrialists (and for) the real economy.\u201d He continued, \u201cthe central banks of the world have behaved irresponsibly\u2026they have created too much liquidity\u2026(and) I think that for Europe, the US, Japan, we are going to have a dose of reality.\u201d<\/p>\n\n\n\n

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The Collerette Myst\u00e9rieuse transformable necklace in gold set with rubies, pink sapphires and diamonds, by Van Cleef & Arpels.<\/figcaption><\/figure><\/div>\n\n\n\n

Over the last six-months, shares of Richemont, the parent of high-jewellers Cartier and Van Cleef & Arpels, are down 35%. Shares of LVMH, the world\u2019s largest high-end luxury conglomerate and parent of Tiffany & Co., are down 25%. Shares of Signet Jewelers, the US mid-market major, are down 50%.<\/p>\n\n\n\n

Despite the drawdown in the stock, Signet has not cut guidance this year and the company is still forecasting year-over-year sales growth of 4% for the fiscal year ending January 2023 \u2013 of note, some of that grow expectation is non-organic, i.e. due to an acquisition the company made in the second half of last year.<\/p>\n\n\n\n

During an analyst call in June, Signet management said the current guidance reflects \u201ca level of consumer pressure\u2026 similar to what is currently being experienced\u2026 (but it) does not include a material worsening of macroeconomic factors.\u201d<\/p>\n\n\n\n

Richemont and LVMH do not provide sales guidance, however, worthy of note, (very) upscale furniture company, Restoration Hardware, cut year-over-year sales guidance on June 29 to -2 to -5%, from a previous 0 to 2%, for the fiscal year ending January 2023.<\/p>\n\n\n\n

The company attributed the change to mortgage rates that are double last year\u2019s levels, luxury home sales that are down 18% in the last quarter and the Fed\u2019s forecast for another 175 basis point rate hike by year end \u2013 with management noting: \u201cour expectation is that demand will continue to slow throughout the year.\u201d<\/p>\n\n\n\n

In China, Chow Tai Fook, greater China\u2019s largest jeweller, provided a mid-quarter update showing that sales declined 13% in April and May (combined), relative to a year ago. The Chinese market has been impacted by a new wave of pandemic-related lockdowns in recent months \u2013 and in mid-June, parts of Shanghai and Beijing faced newly imposed lockdowns after previous restrictions were eased in May.<\/p>\n\n\n\n

Chow Tai Fook\u2019s smaller competitor, Luk Fook, recently noted similar performance, but also said that it still expects to achieve year-over-year \u201cdouble-digit\u201d sales growth in the fiscal year ending March 2023 helped by a \u201crelaxation of the lockdown measures in the Mainland.\u201d<\/p>\n\n\n\n

\n\n\n\n

Paul Zimnisky, CFA is an independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis of the diamond industry please consider subscribing to his State of the Diamond Market<\/a>, a leading monthly industry report; an index of previous editions can be found here<\/a>. Also, listen to the Paul Zimnisky Diamond Analytics Podcast<\/a> on iTunes or Spotify. Paul is a graduate of the University of Maryland’s Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at paul@paulzimnisky.com<\/a> and followed on Twitter @paulzimnisky<\/a>.<\/em><\/p>\n\n\n\n

Disclosure: At the time of writing Paul Zimnisky held a long position in Lucara Diamond Corp, Star Diamond Corp, North Arrow Minerals Inc, Brilliant Earth Group and Barrick Gold Corp. Please read full disclosure at www.paulzimnisky.com<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Diamond industry analyst Paul Zimnisky sheds light on how the global economy is impacting diamond and jewellery sales and reveals expectations for the second half of the year. In H1 2022, central banks around the world began to rein in the massive amounts of financial liquidity provided during the pandemic and they are under pressure…<\/p>\n","protected":false},"author":7,"featured_media":16180,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[107,79],"tags":[],"thb-sponsors":[],"class_list":["post-16179","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retail","category-viewpoint"],"acf":[],"yoast_head":"\nMacroeconomic Uncertainty Tempers Diamond & Jewellery Demand Expectations For H2 2022 - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/gjepc.org\/solitaire\/macroeconomic-uncertainly-tempers-diamond-jewellery-demand-expectations-for-h2-2022\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Macroeconomic Uncertainty Tempers Diamond & Jewellery Demand Expectations For H2 2022 - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine\" \/>\n<meta property=\"og:description\" content=\"Diamond industry analyst Paul Zimnisky sheds light on how the global economy is impacting diamond and jewellery sales and reveals expectations for the second half of the year. 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