(IDEX Online) - Both our short term and our longer term forecast call for strengthening jewelry demand and rising jewelry sales in the U.S. market.

 

After a sharp rebound in jewelry demand during 2010, we expect the jewelry sales growth rate to revert to its long-term growth rate – a “reversion to the mean” – in 2011. This will likely be followed by two more years of solid growth. By about 2014 or 2015, we could see the current economic growth cycle begin to show its age. If so, we would expect jewelry demand to soften.

 

The graph below summarizes our jewelry sales forecast for the American market over the next five years.

 

Source:  Dept of Commerce and IDEX Online

 

The assumptions underlying our jewelry forecast are as follows:

 

·         Jewelry sales cycles mirror economic cycles. When the U.S. economy is in a growth mode, jewelry demand strengthens significantly. When the economy slows, jewelry demand weakens. Thus, with the U.S. economy on the mend from the recent recession, it is safe to assume that jewelry demand will remain relatively robust for at least the next two to three years.

 

·         Consumer balance sheets will continue to strengthen. The savings rate will remain modestly above its recent historic average, the stock market will post moderate growth and home prices will begin to recover.

 

·         Unemployment will slowly decline, and wage and salary gains will be modest.

 

·         In addition, there are long-term drivers of demand, including factors such as favorable demographic trends, increased bridal demand, a growing population, an increase in jewelry self-purchase shoppers and other factors that are enumerated in a separate IDEX Online Research publication.

 

There are some risks to our forecast, including the following:

 

·         The lack of generic diamond advertising is expected to hurt demand for diamond jewelry, especially among independent specialty jewelers who do not have an established diamond brand to offer.

 

·         With jewelry’s average sales ticket generally lower – and likely to remain somewhat lower – jewelers will need to build traffic and increase their conversion rate, if they hope to post increased sales. Consumers are willing to buy jewelry, but they aren’t as likely to make big-ticket purchases at the same pace as in the past.

 

·         As always, our forecast does not take into account a “shock to the system” such as a major terrorist attack on U.S. soil or some other highly unusual event.

 

The graph below summarizes the year-to-year percentage change in projected jewelry sales in the U.S. market. Our forecast calls for the current economic cycle to begin to age by 2014. At that point, jewelry demand begins to slow, as shown on the graph.

 

Source:  Dept of Commerce and IDEX Online