According to management consulting firm Bain & Company, this year’s strong growth in rough diamond sales may lead to a destructive buildup of inventory if consumer demand does not improve.
In the first half of this year, rough sales grew 20 per cent. This occurred as the midstream restocked after a stockpile sell-off in the second half of 2015. Despite this, jewellery retail performance in the first half of the year suggests that sales might not be keeping pace with the rough market’s growth, notes Bain.
“Strong rough diamond sales in 2016 may again lead to swollen midstream inventories if retail demand does not strengthen proportionately,” said the company. “Declining sales at major jewelry retailers in the first half of 2016 indicate a possible demand slowdown in the U.S. and China.”
The report added that the success of the rough and manufacturing sectors in early 2017 would depend on the strength of retail sales this holiday season. Bain also suggests that consumption may continue to slow in China, while the US faces the risk of a cyclical recession.