Factors Expected to Impact Global Diamond Demand in 2024
pandemic-related whipsaw in diamond demand gets further behind us the ripple
effect should continue to moderate as well. Generationally high economic growth
in major consumer markets in 2021 and 2022 was met with proportionately hawkish
economic policy in 2023 that will need to be digested in 2024.
The U.S. economy, the
diamond industry’s largest consumer market, is forecast to grow at a real 1.0%
(net of inflation) in 2024 which would be down from a forecasted 1.4% in 2023
based on an average of forecasts from the IMF, OECD and World Bank. This
compares to as much as 6% in 2021.
The moderation in
growth can, in part, be attributed to the impact of Federal Reserve’s
economic-tightening policy aimed at quelling multi-decade high inflation. The
Fed last raised its target Federal Funds interest rate in August by 0.25%
bringing the range to 5.25-5.50% – marking the highest level since 2001.
A strict string of
rate hikes which commenced in March 2022 has represented the most aggressive
period of monetary tightening in the U.S. since the early-1980s.
inflation is forecast to fall back to the Fed’s 2% (annual) target by 2025
which would be down significantly from a generational high of 8% in 2022. Such
an outcome would allow for a more dovish economic policy in the medium term, as
long as employment remains stable.
While diamond demand
correlates quite highly with economic growth in the major consuming markets
(led by the U.S.), a notable micro factor is expected to potentially offset some
of the softening macro backdrop in the near-term.
A recovery, followed
by a tailwind, in the U.S. engagement ring market in 2024 through 2026 is
possible, which could act as a significant growth catalyst for diamond demand.
The premise is based
on data that marriage engagements typically occur around three years after
couples begin dating, so after adjusting for the impact of the pandemic which
delayed the formation of new relationships, a new bridal cycle is expected to
For context, on a
recent analyst call, Signet Jewelers, the largest diamond seller in North
America, noted that the pre-pandemic number of weddings in the U.S. was 2.8
million and the figure is expected to be about 2.2 million in 2023.
Consequently, Signet’s management estimates that a simple return to a “normal”
level of marriages is worth over $500 million to the industry annually –or an
approximate 5% boost relative to 2023 forecasts.
Moving to China, the diamond industry’s second largest market, consumer demand has underperformed in 2023 relative to expectations – a trend that could carry over into 2024.
While China’s economic
system doesn’t necessarily allow for an ideal relative comparison of growth
when compared to more capitalistic systems, the nation’s economy is undoubtedly
slowing – especially relative to the trailing 25-year average, i.e. of a high
single-digit percentage annual growth rate as measured by GDP.
For instance, the
Chinese economy is forecasted to grow at under 5% in 2024 – putting it more in
line with the world’s more mature, large economies, a far stretch from the
hyper growth enjoyed in decades past. (To put this into context, China has
represented upwards of 40% of the world’s total economic growth over the last
There is mounting
speculation (and a matching sentiment) that the Chinese economy is entering a
longer-term structural moderation, which resonates with recent commentary from
one of the market’s leading corporate entities, Chow Sang Sang.
During an analyst
presentation in August, Chow Sang Sang’s management noted that going forward it
will be “more selective and prudent with new store openings…(shifting the
priority to) improving operating efficiency rather than expanding geographical
This marks a notable change
in trend as Chow Sang Sang has more than doubled its store count over the last
five years to about 1,015 doors.
The other major
corporate jewellers in Greater China, including leader Chow Tai Fook and
LukFook, have also opened new stores at a similarly furious pace. For example,
Chow Tai Fook’s current store count is over 7,500, which compares to about
3,550 just five years ago.
That said, China has a history of stoking its economy with government-induced consumption stimulus, for example its “Dual Circulation Strategy” and “Five-Year Plan,” which could certainly play in role in supporting the market, especially in the face of a lull.