Economic recovery in US yet to help jewellery exporters

Poor consumer response indicates that economic recovery in US is yet to be replicated on Indian ground

 

 

Despite the United States Federal Reserve’s (Fed’s) announcement of tapering in quantitative easing (QE) after indications of a recovery in the world’s largest economy, Indian jewellery exporters anticipate “flat” sales on forthcoming festive occasions – Christmas, New Year and Mother’s Day – which constitute about 35 per cent of annual jewellery sales in developed countries.

The peak season as far as jewellery sales are concerned starts in November with Thanksgiving in the western countries for which Indian jewellers start preparations months in advance. This year, however, the sales were “not so encouraging”,  thanks to uncertainty in the US economy.

The US market, which consumes 40 per cent, is important for jewellery exporters not only in terms of access to global consumers but higher realisations. Gems & Jewellery Export Promotion Council (GJEPC) data show a steep decline of 16.85 per cent in gems and jewellery exports in November after a staggering surge of 41.58 per cent in October.

“Against our previous expectations of growth, we are forecasting flat sales in the export markets in the ensuing festive season. There are talks of a recovery in the US economy but that is yet to reflect on the ground. This means jewellery sales are yet to show any indication of a pick-up,” said Vipul Shah, chairman of GJEPC.

Prompted by a decline in unemployment rate and an improvement in non-farm payroll data, the US Fed announced $10 billion tapering in the monthly bond buying programme from $85 billion to $75 billion beginning January 2014.

“Consumers overbought in the first half. Since, the US economy showed a recovery in the second half of the current calendar year, we expect consumers to compensate their higher purchases with a weak response in the second half. Hence, jewellery sales are expected to remain lacklustre in the second half for the entire year to remain flat,” said Shreyas Doshi, chairman, Shrenuj & Co, a Mumbai-based exporter of precious stones and ornaments.

Gitanjali Gems, which clocks around 13 per cent of its annual revenue from the United States with its   100 retail stores, also estimates jewellery sales to go marginally higher this year by three-four per cent on poor consumer response.

  “US consumers are yet to come out of a weak market sentiment resulting in below-average footfalls at stores. We estimate three-four per cent growth in jewellery sales from our overseas operations, especially from the US,” said Mehul Choksi, chairman of Gitanjali Group.

Meanwhile, rough diamond import has significantly increased in the last couple of months, which indicated that processing activities in India had started growing gradually. Given the revival in the global economic trend coupled with the New Year enthusiasm already on the cards, the industry hopes jewellery sales to revive after February 2014.

Import of rough diamond increased by 30 per cent in volume terms to 113.22 million carats in November this year compared to 87.21 million carats in the corresponding month last year.

In value term, however, rough diamond imports surged 44.26 per cent to Rs 7136.97 crore in November 2013 compared to Rs 4947.25 crore in the same month last year.