The 2022 JCK Show Las Vegas represents a return to normality, but there is a sense of uncertainty in the market.
With the JCK Show-led jewelry week underway in Las Vegas, quite possibly signaling the first full return to a semblance of normality since the onset of the COVID pandemic in 2020, the focus has shifted firmly to the U.S. consumer market, where once again the fortunes of the industry will rest.
The mood of the American consumer as a bellwether for future industry performance has not been considered as closely for some time already, but the general sense of uncertainty about China that prevails, largely as a result of that country’s authoritarian zero-COVID strategy, has left many with the impression that, for the foreseeable future at least, the United States is the main game in town.
But while the American market has proven the be a bulwark for the jewelry industry, save for several months in 2020, as it too learned to digest the new normal of the pandemic economy, a number of factors have emerged more recently that question whether the strong growth demand for diamonds and jewelry will continue apace. Some of these are COVID-related – “Long COVID” economic symptoms, so to speak – but others are the result of other events, such as the war in Ukraine, the rise in inflation and the increased strength of the U.S. dollar.
One of the “Long COVID” impacts that had long been predicted is a presumed shift in consumer spending habits, now that many of the restriction that had been imposed on travel and experiential tourism have been lifted.
This reinvigoration of the travel and tourism sectors, which in years gone by competed fiercely with jewelry for the U.S. consumers’ disposable income, is borne out by research from the Mastercard Economics Institute, which reveals that global leisure and business flight bookings have surpassed pre-pandemic levels, while spending on cruise lines, buses and trains saw sharp improvements this year.
According to the study, by the end of April, global leisure flight bookings surpassed 2019 levels by 25 percent. Global spending on cruises gained 62 percentage points from January to the end of April, though remains below 2019 levels. Experiential spending is now 34 percent above 2019 levels.
4-8 PERCENT GROWTH PREDICTED
A study released the American jewelry market consultancy firm Fruchtman Marketing, ahead of the JCK Show week in Las Vegas, took a cautious but still relatively optimistic perspective of where things are headed.
Fruchtman predicts 4 percent to 8 percent growth in the market over 2021. “We think it will be tough to hit double-digits over last year, which saw double-digit increases the year before,” it states in its report.
“This is positive,” the report hastens to say, specifically addressing independent jewelers. “There are many other businesses that will not be as lucky. As a small business, you are more nimble and have the ability to pivot. It’s not so for big-box retail. They will most likely take a bigger hit.”
Fruchtman is not convinced that spending on travel and tourism will impact as severely as some have forecast. What will impede the category, it states, is the significant spike in travel costs.
While COVID has not disappeared entire, Fruchtman does not believe it will be a factor moving forward. “With vaccinations and medications readily available, consumers are getting back to their normal lives and habits pre-pandemic. It is clear the American public wants to move forward.”
But the Fruchtman report does suggest that we keep an eye of the price index. “Inflation is at a 40-year high, 8.5 percent year-over-year,” it states. “This will affect nearly every consumer. If you are a lower to a moderately priced retailer, it will most likely affect you more. If your customers are more ‘middle class,’ they’re getting squeezed the most.”
MAJOR ECONOMIC SETBACK UNLIKELY
America’s National Retail Federation has taken a generally sanguine approach to the situation, noting that the Federal Reserve faces “a tricky job” in addressing inflation but continuing growth in employment, wages and consumer spending make it unlikely the effort will backfire into a major setback for the country’s economy.
“With changes underway that focus on taming inflation without splintering the economy, the nation’s economic system is in the process of being rebalanced in ways that are testing its resilience,” said National Retail Federation Chief Economist Jack Kleinhenz. “This is an extraordinary period with unprecedented factors that include inflation at a 40-year high, uncertainty over the war in Ukraine, supply chain disruptions and the Federal Reserve raising interest rates. There’s good reason why businesses, consumers and policymakers alike all feel uneasy.”
Kleinhenz’s remarks came in the June issue of NRF’s Monthly Economic Review, which noted that the latest Blue Chip Economic Indicators survey of economists projects that gross domestic product will climb 2.6 percent this year and another 2.1 percent in 2023.
The Imperial State Crown, with the 317-carat Cullinan II diamond at its base.
After soaring 5.7 percent in 2021, GDP contracted by 1.5 percent in the first quarter this year, the first quarterly decline since the pandemic-plagued second quarter of 2020. But Kleinhenz said “there is less reason for concern than the figure suggests.” Consumer spending was up a “solid” 3.1 percent year over year while business investment was up 9.2 percent.