February Economic Bulletin

RAPAPORT... Economic Index Rallies

The Conference Board’s United States leading economic indicator index increased in December 2006 by 0.3 percent, compared with November 2006. Six of the ten indicators that make up the leading index were up in December. The positive contributors were building permits, average weekly initial claims for unemployment insurance (inverted), real money supply, stock prices, vendor performance and manufacturers’ new orders for nondefense capital goods. The leading index now stands at 138.0 (1996=100). The Conference Board also reported that the preceding two small increases were revised down to a slight decrease in October and no change in November.

U.S. Polished Imports Grow

The value of polished diamond imports to the United States rose 2 percent to $1.44 billion in November 2006, while polished diamond exports from the U.S. were up 4.4 percent to $730 million. Meantime, rough diamond imports and rough exports soared for the month, by 71 percent to $70 million and 73 percent to $64 million, respectively. Comparisons are with November 2005.

Israel Polished Exports Fall

The value of Israel’s polished diamond exports fell 11.7 percent to $330.7 million in December 2006, according to data released by the country’s Ministry of Industry, Trade and Labor. In contrast, polished diamond imports rose 8.7 percent to $515.8 million, rough diamond imports jumped 44.6 percent to $530.7 million, and rough diamond exports increased 23.8 percent to $172.8 million.

For the full 12 months of 2006, the average price of Israel’s polished diamond exports improved 6.6 percent to $1,592.22 per carat and the average price of Israel’s rough diamond imports was almost 6 percent higher at $291.33 per carat. The monthly comparisons are with the corresponding month of 2005 and the annual price comparisons are with the previous year.

Israel Jewelry Exports Rise

The value of Israel’s jewelry exports rose 2.6 percent in 2006 to $390 million, statistics from Israel’s Ministry of Industry, Trade and Labor showed. The Israel jewelry industry’s exports were comprised of gold jewelry at 80 percent, one-third of which was set with diamonds and colored gemstones; fashion jewelry 12.5 percent; and silver jewelry 7.5 percent. Exports of gold jewelry set with diamonds and colored gemstones rose 4 percent in 2006 to $131 million, with the United States again the main export destination for those goods with a 56 percent market share. The U.S. also imported 68 percent of Israel’s fashion jewelry and 77 percent of Israel’s plain gold jewelry. Percentage comparisons are with 2005.

Belgium Polished Exports Up

The value of Belgium’s polished diamond exports totaled $767.4 million in December 2006. This result was 13.7 percent higher than for the same month of 2005, even though the amount of polished diamonds exported remained roughly similar — with only a 0.6 percent difference — at 647,298 carats, according to figures released by the Antwerp World Diamond Center’s HRD Diamond Office.

For the full 12 months of 2006, the average prices for the Belgium diamond industry’s polished diamond exports and polished diamond imports both increased year-on-year — by 14.6 percent to $1,088 per carat and 10.7 percent to $969 per carat, respectively.

China Diamond Imports Surge

China’s diamond imports rocketed 80.2 percent in 2006 to more than $210 million, reported the Shanghai Daily. This saw the value of China’s diamond imports and exports climb 44.4 percent for the year, hitting a record high of $610 million. Attributing the big leap in imports to the reduction in China’s value added tax (VAT) on imported diamonds, the Shanghai Diamond Exchange noted that 2006 imports, including rough and unset diamonds, matched the combined total value of imports for 2004 and 2005.

China reduced the VAT on imported polished diamonds from 17 percent to 4 percent on July 1, 2006.

Japan Polished Costing Less

The value of Japan’s polished diamond imports dropped 19.1 percent to $74.3 million in November 2006. This marked the fourth consecutive month of lower polished diamond imports by value. In carat terms, however, 18.3 percent more polished diamonds or 214,915 carats were imported for the month.

Year-to-date, there has been a 9.8 percent lift in polished diamonds imported into Japan in volume terms for a cumulative total of 2.5 million carats, which have cost 11.7 percent less at $945.5 million. That equates to an average price of $375.79 per carat, down 19.5 percent. The monthly comparisons are with November 2005 and the year-to-date comparisons are with the January through November 2005 period.

Kristall Sales Beat Forecast

Smolensk Kristall’s diamond sales for 2006 rose 3.2 percent versus 2005 to $358.2 million, the Russian state-owned company advised. This result was better than Kristall had anticipated in November 2006, at which time it predicted sales would end up flat for the year at about $340 million. The group’s 2005 diamond sales reached $347 million, which itself was up 11 percent on the previous 12 months. Kristall generates about 30 percent of Russia’s cut diamond output.

Russia Exports $1.7 Billion

In its initial disclosure of rough diamond exports, Russia’s finance ministry estimated that rough exports for 2006 came in at about 35 million carats and it valued the rough at about $1.7 billion. The ministry reported that the European Union, Israel and Dubai were the main export destinations during 2006.
 
Rio’s Argyle Output Jumps

Rio Tinto announced that its diamond production increased 26 percent to 9.6 million carats in the fourth quarter of its 2006 fiscal year (FY), however, for the full FY, output fell 1 percent to 35.2 million carats. The 100 percent-owned Argyle mine in Western Australia — the global, diversified resources giant’s diamond production mainstay — returned 8 million carats for the fourth quarter ended December 31, 2006, and 29 million carats for the full FY. These Argyle totals represented a production rise of 24 percent and a decline of 5 percent, respectively.

Dubai Gold Trade Swells

Dubai’s gold trade surged 37 percent in 2006 to $14.75 billion, the Dubai Multi Commodities Centre (DMCC) announced in a statement. In 2006, Dubai imported a total of 489 tonnes of gold, while exports from Dubai increased 23 percent to 274 tonnes. In line with global trends, there was a correction in the level of Dubai’s imports, which in 2005 totaled 522 tonnes. Dubai’s top trading partners for gold in 2006 were India, Switzerland, the United Kingdom, Malaysia, and the Gulf Cooperation Council (GCC) states.

“Despite consistently high prices, the significant growth in the value of gold imported and exported through Dubai in 2006… [compares] very well against other global gold centers, particularly in Europe where higher gold prices resulted in significantly lower demand in 2006,” commented Ahmed Bin Sulayem, DMCC’s chief operating officer. All comparisons are with 2005.

Gold Jewelry Fabrication Dives

Gold jewelry production plunged by more than 400 tonnes or 16 percent in 2006 due to a combination of high and volatile gold prices, according to GFMS Limited. The London-based precious metals consulting firm’s 2006 gold survey revealed that three countries accounted for more than half of the near 440-tonne decline — India, Italy and Turkey. One of the worst January to June performances on record precipitated the sharp drop in India. Italy and Turkey were affected by weak export demand, particularly from the United States where a combination of low consumption and a shift away from plain gold adversely affected the country’s jewelry imports.

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