Economic downturn cuts diamond sales at De Beers by 26 per cent

Diamond sales at De Beers, the world's leading diamond supplier, have fallen by a quarter over the past six months as the global economic slowdown hit consumer spending on luxury items.

The company said sales of uncut gems at the five auctions it held in the last six months fell 26 per cent to $2.6bn (£1.9bn). The figure beat expectations of $2.4bn to $2.5bn. Cutters and polishers bought fewer rough stones as demand from retailers, particularly US jewellers, shrank. The Japanese retail market remains subdued but sales in Europe have rose modestly with the UK and France performing particularly well.

"On balance, the sales are better than expectations. I'd seen forecasts of a 30-35 per cent fall and if there was to be any surprise it was expected on the downside," said one analyst.

The company, which controls 65 per cent of the world's trade in uncut diamonds, expects the market to improve in the second half. Gary Ralfe, managing director, said the company was on target to report second-half sales of $2.2bn and annual sales of $4.8bn, a 15 per cent decrease on the previous year's figure. De Beers warned the extent of any recovery will depend on economic growth and stocks of rough and cut diamonds falling from the currently high $6bn level.

Analysts believe De Beers is willing to hold back the supply of diamonds but is likely to resist price cuts.

Shares in the Anglo American mining giant, which owns 45 per cent of De Beers, rose 19p to 1,080p on improved prospects for second-half diamond sales. An Anglo-led consortium last month took De Beers private in a $19bn takeover.