Rapaport Magazine

Economic Bulletin

May 2007

By Rapaport
RAPAPORT... Consumer Confidence Dips But CEOs Upbeat

Consumers may be feeling put out by rising gas prices, but chief executive officer (CEO) confidence is rising, according to two studies from the Conference Board. The Consumer Confidence Index slipped for the second consecutive month, to 104.0 (1985=100) in April from 108.2 in March and 111.2 in February, while the quarterly Chief Executives’ Confidence Measure rose for the second time, gaining 6 percent to 53.

On the consumer side, the Present Situation Index, in which consumers appraise current-day conditions, fell for the first time in six months — a slippage that “warrants monitoring as further declines would suggest a softening in growth,” noted Lynn Franco, director of The Conference Board’s Consumer Research Center. Franco attributed the overall April decline to “a combination of weakening expectations and a less favorable assessment of present-day conditions,” notably the steeply rising prices at the gas pump.

Consumers continue to view the short-term outlook with a degree of caution. The percentage anticipating that business conditions will worsen in the next six months rose to 10.2 percent from 9.8 percent, while those expecting conditions to improve fell to 13.5 percent from 14.5 percent. Seventeen percent of consumers expect their incomes to increase in the months ahead, slightly less than the 18 percent who did in March. Among the CEOs, however, nearly 27 percent expect economic conditions to improve in the next six months, down slightly from 29 percent last quarter. However, the number of CEOs expecting condition to deteriorate fell almost by half, to 15 percent from 27 percent in the prior survey.

U.S. Inflation: Holding Steady

Wholesale prices in the United States rose 1 percent in March 2007, following a 1.3 percent increase in February. The numbers did not raise inflation concerns, however, as officials attributed the increases to volatile energy and food costs. While gasoline prices rose 8.7 percent and food was up 1.4 percent, prices in the other sectors were flat for the month.

The U.S. Commerce Department noted, though, that inflation rose 0.3 percent in February 2007, pushing the 12-month core inflation rate up 2.4 percent, far above the Federal Reserve’s “comfort zone.” As a comparison, the European inflation rate for the 12 months through February was 1.8 percent. Federal Reserve Chairman Ben Bernanke told Congress that inflation remains the central bank’s chief concern, though other risks to economic growth — notably a housing slump and a reduction in business investment in equipment and labor — also have grown more pronounced. The Fed has held interest rates steady since August 2006.

U.S. Price Per Carat Soars

Polished imports to the United States rose 7.5 percent to $1.414 billion in February 2007, while the price per carat increased 32 percent to $1,158. Polished exports rose 20 percent to $759 million, but the net polished import figure fell 4.1 percent to $655 million. Rough diamond imports rose 91 percent to $86 million and rough exports rose 24 percent to $41 million. Net rough imports jumped 275 percent to $45 million. For the first two months of 2007, therefore, polished diamonds into the United States rose 10.1 percent to $2.854 billion and polished exports rose 16.6 percent to $1.549 billion. Rough imports rose 54.7 percent to $147 million and rough exports rose 51 percent to $92 million.

Belgium Rough Trade Rises

Belgium’s polished diamond exports dropped 2.3 percent to $1.011 billion in March 2007, reflecting a drop in net polished exports of 15.9 percent to $149.07 million, the Antwerp World Diamond Centre (AWDC) announced. While polished imports rose by less than a percent to $861.8 million, imports of rough diamonds rose 49.7 percent to $966.4 million, and rough exports increased 27.7 percent to $1.03 billion. Hong Kong’s imports grew 19 percent, making it the second-largest buyer after the United States.

For the first quarter of the year, the country’s polished exports rose 4.2 percent to $2.624 billion, while polished imports grew 2 percent to $2.329 billion. Net polished exports jumped 24.9 percent to $294.8 million; rough imports rose 21.4 percent to $2.7 billion, while rough exports grew 20.4 percent to $2.93 billion. Net rough imports fell 9.2 percent to $226.5 million.
Israel Polished Exports Slip

Israel’s exports of polished diamonds dropped 23.3 percent to $520 million while polished imports dropped 4.4 percent to $334 million in March 2007, reported the country’s Ministry of Industry, Trade and Labor. For the same month, rough imports grew 35.1 percent to $446 million and rough exports rose 15.5 percent to $301 million. For the first quarter of 2007, polished exports were down 2.1 percent, to $1.87 billion. All comparisons are with the corresponding periods of 2006.

Japanese Import Numbers Slide

Japan’s polished diamond imports for February 2007 dropped 16.3 percent to $67.62 million and its ruby, sapphire and emerald imports fell 18.2 percent to $3.6 million. India was again Japan’s top supplier of polished diamonds, with exports of $30.94 million taking 45.8 percent of the market — down 13.8 percent. Trade with the United States showed significant growth, with February imports into Japan rising 37.9 percent, to $4.6 million, for a 6.8 percent share of the Japanese polished diamond market. The biggest growth came from China, which tripled its exports to $1.4 million. Overall, Japan’s polished diamond imports fell 21.9 percent, to $150.54, in the first two months of 2007.

Russia Holds Its Lead in Diamond Production

The Russian Federation was the world’s top producer of rough diamonds for the second straight year in 2005, producing 38 million carats, according to recently released Kimberley Process (KP) figures audited by the KP Working Group on Statistics (WGS). The next largest producers were the Democratic Republic of the Congo with 33 million carats, Australia with 32.9 million carats, Botswana with 31.8 million and South Africa with 15.5 million. Botswana had the highest dollar value, $2.87 billion, or $90 per carat, followed by the Russian Federation, with $2.53 billion or $66.6 per carat. Total world production increased 11 percent to 176.7 million carats in 2005, while the total value of rough diamond output rose 13 percent to $11.54 billion. Rough prices rose slightly to $65.33 per carat in 2005, up from $64.23. All comparisons are with 2004. (See also WGS article in News Briefs.)

ALROSA Dividend Likely

ALROSA posted a profit of 15.57 billion rubles ($599.96 million) in 2006, up 3.2 percent, and mined $2.3 billion worth of diamonds for the year. Rough sales held flat at $2.86 billion. ALROSA is expected to pay out dividends, though the final decision will not be made until the June shareholder meeting. For 2005, shareholders received 9,810 rubles ($377.79) per share.

India: Polished Imports Down, Gems & Jewelry Up

India exported $1.210 billion in polished diamonds in March 2007, a drop of 2.1 percent. Polished imports rose 5.5 percent to $210.9 million while net polished exports fell 3.5 percent to $999.1 million. Rough diamond imports and exports were both up for the month, rising 35.8 percent to $802.71 million and 70.8 percent to $77 million, respectively, pushing the net rough import total up 33.3 percent, to $725.71 million. In provisional data for the first three months of the calendar year, polished exports rose 2 percent and polished imports declined 43.9 percent. Rough imports rose 13.7 percent and rough exports fell 21.6 percent.

Separately, the Gem and Jewellery Export Promotion Council (GJEPC) reported that gems and jewelry exports rose 2.7 percent to $17.1 billion during India’s fiscal year ended March 2007, missing the GJEPC target of $18 billion. Exports of cut and polished diamonds fell 7.8 percent to $10.9 billion. 

DateGold London PMPlatinum PMSilver

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