New York: According to an ABN AMRO forecast, polished diamond prices will rise next year thanks to improved economic conditions that boost U.S. and Chinese demand.

U.S. jewelry consumption will grow amid a stronger labor market and rising housing prices, the bank said. Anticipated tax cuts together with higher infrastructure and defense spending will play a central role in boosting economic growth in the U.S.

“The overall diamond price index is in the process of bottoming out,” the report said, pointing out that the pace of retreat in polished prices has slowed. “We expect demand for polished diamonds to pick up in 2017, driven by an improvement in U.S. and Chinese jewelry demand.”

ABN AMRO raised its forecast for China’s economic growth to 6.5 percent from 6 percent. “Against this more constructive outlook, we expect the Chinese middle class to grow and diamond jewelry demand to rise over time,” the bank projected.

Stronger jewelry demand will go hand in hand with an improvement in the internal structure of the diamond industry, which has suffered from an imbalance between rough and polished prices in recent years, the report noted. Price fluctuations will better reflect end consumer demand as the midstream has been forced to be more conservative in its rough buying due to lower availability of credit, ABN AMRO added.

Meanwhile, the bank predicted that global rough production will be stable at about 126 million carats next year. In the long term, output is expected to decline by an average of 1 percent per year because of lower ore grade, the depletion of existing deposits and the absence of new discoveries.