Apparel and Knitwear AHH Saheed
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46 Apparel and Knitwear After over-reacting to the economic slowdown in 2008, global textile consumption expanded by 2.8% in the recessionary environment of 2009, and by 5.3% in a scenario of faster-than expected growth in 2010. The banking crisis in Europe, the tapering off the effects of expansionary policies applied during the recession, and concerns about the sustainability of sovereign debt in major developed economies resulted in a deceleration of global economic activity in 2011 to 3.9%. World textile consumption echoed that deceleration expanded by only 1.9% to 73.8 million tons in 2011. The growth of demand in developing countries more than offset the decline in industrial countries. The market share of all developing countries in world end-use textile consumption amounted to 61.9% in 2011, from which 49.5% corresponded to developing Asia. World end-use cotton consumption contracted to 1.2 million tons (-4.9%) to 23.8 million tons in 2011, while non cotton-fiber consumption increased by 2.6 million tons (5.5%) to 50.1 million tons in 2011. Based on slower projected economic growth for the short run and long-term average growth rate for the medium and long-term, world textile fiber consumption reached 106 million tons in 2010, and 130 million tons in 2025.(ICAC) The global textile and clothing trade between 2000 and 2011 has advanced by over 100% from US$ 352 bn in 2000 to US$ 706 billion in 2011. The global textile and clothing exports in 2011 expanded by over a hundred billion dollars over 2010. Asian region was the leading region and with export value of US$ 404 bn accounted for 57.2% of total textile and clothing exports in 2011.The top five exporters of textile and clothing during 2011 were China at US$248 bn, Italy at US$ 38 bn, Germany at US$ 36 bn, Hong Kong at US$ 36 bn and India at US$ 29 bn. Emerging countries are cited as having long-term investment potential, yet they have underperformed since late 2010, taking a closer look at these countries, you’ll see that a key reason for underperformance has been the persistent inflation. Emerging countries have generally being growing at too fast, for example; China economy grew at 10.3% in 2010, while Brazil economy grew at 7.6% with strong economic growth, with this the demand for labour has increased, which has put upward pressure on wages, particularly in China, higher wages can stoke inflation, as wages is an input for a broad range of product and services. However main reason that inflation has been rising is due to higher food prices. Food accounts for 20-50% of household spending in emerging markets compared to less than 14% in the United States. However, according to ILO Report, Wage growth remains far below pre-crisis levels globally and has fallen into the red in developed countries, despite continuing increases in emerging economies. Global monthly wages grew by 1.2% in 2011, down from 3% in 2007 and 2.1% in 2010, according to Global Wage Report 2012/2013. These numbers are even lower if China is excluded from the calculations. Status of the global textile and apparel industry with uncertain economy and rising wages by A.H.H.Saheed, Chartered Marketer. Textile and Apparel market are likely to remain subdued in 2012, given the considerable uncertainty in the global economy. The IMF has lowered its forecast for World Economy Growth in 2012 to 3.5% from 3.6% (in April). Euro zone and USA debt concerns, weak market conditions in the EU and the USA, have increased market volatility and has affected exports of several countries. Further in many developed markets, high level of government and household debt are dampening growth prospects and developed economies will stay in the slower lane. Although Japan supply chains has been recovering at a rapid pace, the slower –than expected recovery in the USA, and more worryingly the spectre of an EU’s sovereign debt crisis, are major causes for concern and as a result many countries has revised downward growth of Gross Domestic Product (GDP). Nevertheless, emerging countries, and in particular the so called BRIC countries –comprising Brazil, Russia, India and China-will continue to sustain the global trade growth over the coming years.
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Apparel and Knitwear AHH Saheed
Transcript of Apparel and Knitwear AHH Saheed
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Apparel and Knitwear
After over-reacting to the economicslowdown in 2008, global textileconsumption expanded by 2.8% in therecessionary environment of 2009, andby 5.3% in a scenario of faster-thanexpected growth in 2010. The bankingcrisis in Europe, the tapering off theeffects of expansionary policies appliedduring the recession, and concerns aboutthe sustainability of sovereign debt inmajor developed economies resulted in adeceleration of global economic activityin 2011 to 3.9%. World textileconsumption echoed that decelerationexpanded by only 1.9% to 73.8 milliontons in 2011. The growth of demand indeveloping countries more than offset the
decline in industrial countries. The marketshare of all developing countries in worldend-use textile consumption amounted to61.9% in 2011, from which 49.5%corresponded to developing Asia.
World end-use cotton consumptioncontracted to 1.2 million tons (-4.9%) to23.8 million tons in 2011, while noncotton-fiber consumption increased by2.6 million tons (5.5%) to 50.1 milliontons in 2011.
Based on slower projected economicgrowth for the short run and long-termaverage growth rate for the medium andlong-term, world textile fiberconsumption reached 106 million tons in2010, and 130 million tons in2025.(ICAC)
The global textile and clothing tradebetween 2000 and 2011 has advancedby over 100% from US$ 352 bn in 2000to US$ 706 billion in 2011. The globaltextile and clothing exports in 2011expanded by over a hundred billiondollars over 2010.
Asian region was the leading regionand with export value of US$ 404 bnaccounted for 57.2% of total textile andclothing exports in 2011.The top fiveexporters of textile and clothing during2011 were China at US$248 bn, Italy atUS$ 38 bn, Germany at US$ 36 bn, HongKong at US$ 36 bn and India at US$ 29bn.
Emerging countries are cited ashaving long-term investment potential,yet they have underperformed since late2010, taking a closer look at thesecountries, youll see that a key reason forunderperformance has been thepersistent inflation.
Emerging countries have generallybeing growing at too fast, for example;China economy grew at 10.3% in 2010,while Brazil economy grew at 7.6% withstrong economic growth, with this thedemand for labour has increased, whichhas put upward pressure on wages,particularly in China, higher wages canstoke inflation, as wages is an input for abroad range of product and services.
However main reason that inflationhas been rising is due to higher foodprices. Food accounts for 20-50% ofhousehold spending in emerging marketscompared to less than 14% in the UnitedStates.
However, according to ILO Report,Wage growth remains far below pre-crisislevels globally and has fallen into the redin developed countries, despitecontinuing increases in emergingeconomies. Global monthly wages grewby 1.2% in 2011, down from 3% in 2007and 2.1% in 2010, according to GlobalWage Report 2012/2013.
These numbers are even lower ifChina is excluded from the calculations.
Status of the global textile and apparel industrywith uncertain economy and rising wages by A.H.H.Saheed, Chartered Marketer.
Textile and Apparel market arelikely to remain subdued in 2012,given the considerable uncertaintyin the global economy. The IMF haslowered its forecast for WorldEconomy Growth in 2012 to 3.5%from 3.6% (in April). Euro zoneand USA debt concerns, weakmarket conditions in the EU andthe USA, have increased marketvolatility and has affected exportsof several countries. Further inmany developed markets, highlevel of government and householddebt are dampening growthprospects and developedeconomies will stay in the slowerlane. Although Japan supply chainshas been recovering at a rapidpace, the slower than expectedrecovery in the USA, and moreworryingly the spectre of an EUssovereign debt crisis, are majorcauses for concern and as a resultmany countries has reviseddownward growth of GrossDomestic Product (GDP).Nevertheless, emerging countries,and in particular the so called BRICcountries comprising Brazil,Russia, India and China-willcontinue to sustain the global tradegrowth over the coming years.
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Apparel and Knitwear
The report clearly shows that in manycountries, the crisis has had a strongimpact on wages and by extensionworkers states ILO Report, But theimpact was not uniform. There are alsoconsiderable differences in wage levelsacross countries. A worker in themanufacturing sector in the Philippinestook home US$ 1.40 for every hourworked, compared to less than US$ 5.50in Brazil, US$ 13 in Greece, US$ 23.30 inthe United States and almost US$ 35 inDenmark.
With Chinas wages rising fast, thereis a momentum for emerging countries toposition themselves into the global valuechain. China is now moving to a new eraof transformation and faces majorchallenges in its labour market beingunable to control wage increases. In someprovinces for instance between 2009 and2012 wage have increased by 70% oftheir minimal wage, other regions are inthe order of 40%- 60%. This is partlybecause Chinas population is agingrapidly, its working age population isexpected to shrink as early as 2015. Forinstance people above 60 years of agewill represent 16.4% of the population by2015, while they only represented only8% in 1980. In addition to China, thewages are also rising in Bangladesh,Cambodia, and Vietnam, etc.
Manufacturing costs are mounting inChina. Wages and benefits of workershave already increased considerably forthe last decade and were going up by 15-20% per year, while the USA wages rosemoderately by 3-4 %. Yet, Chinesemanufacturing will not decline in spite ofits higher costs as its industrial might isgrowing and the country will remain aformidable competitor. With its massiveskilled workforce and well establishedinfrastructure, it will be still moreattractive than its neighboring countries,for industries with economics of scale andhigh end manufacturing.
There are signs that textile andclothing production is starting to movegradually back to developed countriesafter being seriously eroded bycompetition from low-cost Asianproducers, but such moves are extremelylimited. The textile and apparelproduction will not probably come backto the USA, but regional sourcing fromMexico and Central America could beboosted by the surge of Chinese costs.
Furthermore the reemergence of theWestern Hemisphere is becoming a viablealternative to China and its Asianneighbours. With favorable tradeagreements and tariff exemptions, LatinAmerica is becoming more of anattractive sourcing option for productslooking to find the right conditions thatentail proximity and speed to market, andwell managed supply chain.
The recent passage of additional FTAswith the USA is offering newopportunities for US companies toexpand sourcing with these free tradepartners, in addition to Mexico andCentral America.
Today in this scenario a cheap labourforce, favorable trade agreements andthe proximity to end markets, which weretraditional ingredients for developingcountries to enter the textile and apparelindustry are not sufficient to move up theapparel value chain.
Therefore the developing economiesif they want to compete againstdominant exporters such as China, theyhave to move up the apparel value chain,the production process has to beupgraded, and produce higher value-added products.
The way is to produce higher value-added products is to evolve from simplecut, make and trim (CMT), to originalequipment manufacturing (OEM) andthen to original design manufacturing(ODM). Once ODM is achieved, theymay move to most advanced process
original brand manufacturing (OBM).
For instance, some developingcountries has upgraded the assembly toOEM/Full package. And some alsoupgraded from assembly to ODMmodels, including its own design. Yetmost LDC,s are still at the CMT stage.
Further, it is important, the presenceof a domestic or regional textile industryto emerge as accelerator of thetransformation. This benefits countries inmoving from CMT to OEM/Full package,with a domestic supply chain in place. Insome countries domestic supply chain isalready strong, wherever some benefitsfrom regional textile opportunities anddevelop links with their textile industries,However this was neither the case formost of the LDC,s where no establisheddomestic or regional textile industryexists.
The relocation of the textile andapparel production-upstream, midstreamand downstream from developedcountries in the West, has shifted todeveloping countries in the East over thepast two decades. This has enabledcorresponding rise of activities for thedeveloping nations of the East.
The industrial revolution which madeEuropean countries as well as UnitedStates and Japan to become the leadingworld economies, but now China ,Indiaare making a comeback and Asia isassured to remain the most populous andeconomic vibrant region in theforeseeable future.
