Diamonds hit by weaker demand

Johannesburg - The World Federation of Diamond Bourses (WFDB), an industry body representing 28 affiliated diamond bourses worldwide, said on Thursday that initial reports from major markets indicate that consumer spending during the 2009 holiday season had fallen at some of the steepest rates seen over the past four decades.

WFDB President Avi Paz said in a statement that the fall in consumer spending was inevitable, given the general mood of uncertainty that has prevailed since the onset of the global financial crisis at the start of the fourth quarter of 2008.

"Consumers are shell-shocked at present, and as such they instinctively cut back on spending," Paz said.

But he was confident that the fundamentals of the diamond business were sound, arming the industry to make its way through the current downturn and emerge healthy as it has done in the past.

"Research conducted already after the onset of the financial crisis demonstrated that not only do diamonds retain their appeal, but they lead the luxury product category by a large margin," said Paz.

To illustrate the resilience of the diamond market, Paz said the industry witnessed severe drops in consumer spending during the Asian financial crisis of the late 1990s, and in the general downturn following the September 11 attacks in the US.

While these drops on spending "even reached into double digits", the diamond sales quickly recovered, he said.

"These clearly are challenging times, but we should not lose perspective of the versatility and resourcefulness inherent in the diamond and in our business model. We must be steadfast and act responsibly, continuing to look for and identify new opportunities in our market," Paz said.

- I-Net Bridge