Trends in textile and apparel industry

The global recession took a headlong dive in 2008. The World Trade Organization (WTO) estimates production in all industries will fall a further 9% in 2009 as the recession bites even further. Major players in the global textiles industry - China, the US and the European Union (EU) - have been affected to different degrees.

 "China's growth contracted over the course of 2008. According to the Xinhua News Agency, customs figures showed that the China's textile and garment exports were worth US$ 185.17 billion in 2008, an increase of 8.2% over year 2007. During the year 2007and 2008, a negative difference of 10.7% in growth rates has been drawn, reflecting a slow down in growth rate over the course of period 2006 to 2008. During the year 2008, China’s apparel export amounted to US $113.02 billion, an increase of 3.99% over previous year, according to the National Centre for Trade and Information (NCTI), New Delhi."

This economic slowdown had the severe impact on India’s exports and employment. Union Minister for commerce and industry Mr. Anand Sharma said “India’s exports saw a 29% drop in June 2009”. The country’s export are experiencing declining trend for the last nine months. In May 2009 India’s export saw a decline of 29% to US$ 11 billion in May 2009. In April 2009 the decline was 34%. “648 exporting units across the India saw a loss of Rs. 8982 crore between August 2008 to April 2009” according to a survey conducted by commerce department. During this period 1,34,593 people lost their jobs.

However, Indian government said employment rate in India in some sector grew by 0.6% during the Jan-Mar’09. Non-exporting unit generating more jobs than the export units. In textile employment generated by 0.96%, in gems and jewellery units grew by 3.08% and IT-BPO by 0.82%.

During the first five months of year 2009 India’s export of clothing declined by 10.58% to US$ 1564 million over the corresponding period of previous year. However, in rupee terms India’s export saw a growth of 7.32% to Rs. 7710 crore over the same period of previous year. Thanks to USD which appreciated against Indian rupee. During Jan-June’09 Indian rupee depreciated by 22.57% over the same period of previous year.

During the year 2008 Japan’s total import of RMG from world account for US$ 24.28 billion with an increase of 7.43%. Also, during the first five month of this year (2009) Japan’s total import of Readymade Garments accounted for US$ 9.59 billion with an increase of 4.56% over the corresponding period of previous year.

However, Japan’s import of RMG from India has been declining while its global import is increasing year-on-year. According to the DGCI&S, Kolkata, RMG exports from India to Japan accounted for US$ 105 million in FY 2007-08 with a decrease of 14.63% over the same period of previous year.

The rise of Yen in the second half the year 2008 resisted the economic crisis in the first month of the 2009. The strength of Japanese Yen supported their imports when being paid in US Dollars. China is still the predominant supplier of Readymade Garment to Japan as well as the world.

The dramatic slowdown in US economy (China’s main export market), the appreciation of the Yuan, an industry liquidity shortage and the surge in cost of production materials has clearly had impact and illustrates the interdependence of the two countries. Chinese apparel and textiles manufacturers are now looking to local consumption to sustain the industry over the next year, as the domestic market still showing positive signs with a nearly 26% growth in total clothing retail sales for 2008 and a rise of 8.4% in the disposable income of urban households, according to National Bureau of Statistics figures.

In the US situation was pathetic, with the employment rates in the textile manufacturing sector falling 2.4% over the course of 2008, according to the US Bureau of Labor Statistics. Particularly hard hit were women in this sector with a 10.8% unemployment rate, which is double the national average. According to the US National Council of Textile Organizations, some 60,000 jobs have been lost overall in 2008 in the textile and apparel sector, and 44 textile plants have been closed all over the country.

During the year 2008 US imports of Readymade Garments accounted for US$ 73.10 billion with a decline of 3.25 percent over the previous year. During this period India’s exports to USA declined by 3.11 per cent to US$ 3.12 billion, as per the data released by NCTI, New Delhi.

Moreover, during the first four month of 2009, USA’s import of Readymade Garments hit badly. A decline of 11.40 percent has been witnessed during the Jan-Apr 2009. India’s import hit by 10.40 per cent, Indonesia hit by 1.22% and Mexico saw a decline of approx 20 percent over the same period of previous year. While China and Vietnam reported a growth of 2.74% and 3.62% respectively.

The above chart depicting the market share of top supplier countries to USA in each month since Jan’09 to Apr’09.

The appreciation of USD against Indian rupee gave some relief to indian exporters. Indian currency rose 3.4% against the US$ in the first half of the year 2009, making it more difficult for domestic exporters to further reduce their prices. In June, US Dollar fell against the Bangladeshi Taka and the Vietnamese Dong, threatening efforts to lower retail prices and boost apparel consumption.Though, the US Dollar remained relatively stable in June against other major currencies, after heavily declining in March and May.

There is no sign of growth in US retail sales. During the month June 2009 US retail sales reported a decline of 6.2% from the same month in 2008. However, earlier this month US apparel chains had reported more gloomy results. “In huge numbers other US retailers reporting decline in double digits” according to emerging textiles.

Effects of the recession in the EU began to be seen in the second quarter of 2008, as production slowed down. Unemployment rose 1.3% over the course of the year with GDP falling 1.6%, with all exports falling 1.2%, according to EU statistics bureau Eurostat, and textile production falling almost 15% over the course of 2008.

However, according to National Center for Trade and Information (NCTI), during the year 2008, EU’s import of RMG from world accounted for Euro 109.82 billion with an increase of 1.26 per cent over the previous year. Import from India accounted for Euro 3.90 million with an increase of 1.62 per cent. In the first two months of the year 2009 EU’s import of RMG from India rose by 0.52% to Euro 793.51 million.

The actions of individual governments have become critical steps to recovery. Government intervention in developing countries like Pakistan, India, Nigeria and Indonesia has taken various forms - tax relief, suspending tariffs or export duties and assuring financing and liquidity for enterprise - although it is too early to see what real effects they are having.

In the European Union retail sales disappointed the EU in May’09. According emerging textile retails sales fell 1.6% in volume terms in May from a year earlier. However, the continued reluctance of banks to lend money are depressing demand from consumers.

Source: emerging textile, Just-style