Prospect of clothing trend in 2023
Increased possibility of global economic recession
At the beginning of January, the International Monetary Fund said that the outlook of the world's major economies this year is not optimistic, and one third of the world's economies and half of the EU's economies will be in recession. On January 10, the World Bank released the latest Global Economic Outlook report, which lowered the global economic growth forecast for 2023 from 3.0% in June 2022 to 1.7%, the third lowest growth rate in nearly 30 years, only higher than that in 2009 and 2020 when the global recession occurred. In 2023, the economic growth of developed economies will decrease from 2.5% in 2022 to 0.5%, and that of emerging markets and developing economies outside China will decrease from 3.8% in 2022 to 2.7%.
External demand has cooled significantly, and the pressure of destocking continues
Inflation has a significant inhibitory effect on consumption. Inflation in the United States fell back to 6.5% in December, the sixth consecutive month of decline. Inflation in the euro zone in December was 9.2%, the first time since August. Although inflation in the United States and Europe has peaked and slowed down, it will continue to consolidate at a high level for a long time. High interest rates and soaring inflation have led to a sharp increase in US household debt. According to Federal Reserve data, US household debt surged by US $351 billion in the third quarter of 2022, the largest increase since 2007. During the epidemic, American consumers obtained 1.5 trillion dollars of excess savings from fiscal stimulus. It is expected that the excess savings will be exhausted by the middle of 2023, when consumption will be greatly impacted. In the European Union, the energy crisis has led to a sharp rise in the cost of production and living. In recent months, the prices of energy and food in the euro area have continued to rise, leading to a sustained downturn in consumption. In October, EU retail sales fell 1.7% month-on-month, down 2.4% year-on-year. The survey results of household income and expenditure in November 2022 released by the Ministry of General Affairs of Japan on January 10 also showed that the average monthly consumption expenditure of each household with more than two people actually decreased by 1.2% over the same period last year, the first decrease in six months. In November, Japan's real wages fell 3.8% year on year, falling for eight consecutive months. Core inflation also hit a 40-year high, bringing more pressure on consumption.
Clothing retail slowed down. In November, the retail sales of clothing stores in the United States reached US $26.35 billion, down 0.2% from the previous month, and up 0.7% from the same period last year, the slowest growth rate in the year. In the first 10 months, Japan's textile and clothing retail sales totaled 6.9 trillion yen, up 2.5% year on year, and still down 22% from the same period before the epidemic. The German Retail Association said that because of the Russian-Uzbekistan conflict and its economic consequences, consumers and retailers have great uncertainty, and it is expected that sales will not recover immediately in 2023.
The inventory adjustment will continue. In October, the inventory/sales ratio of clothing stores in the United States was 2.15, and the inventory growth trend slowed down. The inventory level dropped 3.6% from the peak in 2022, but was still 18% higher than the same period last year.
Imports have slowed sharply in the past two months. After the rapid growth of 16.6% in the first three quarters of 2022, the US clothing imports fell by 4.7% and 17.3% in October and November; In the first 10 months of the EU, the cumulative clothing imports increased by 17.1%, but decreased by 12.6% in November; Japan's imports also fell 2.4% in November.
Recently, the export of overseas suppliers has slowed sharply
In November 2022, the United States' clothing imports from Vietnam showed a rare decline, with a year-on-year decrease of 4.3%. During the same period, the United States and the European Union also imported clothing from Bangladesh by 9.8% and 3.5% respectively. After China, the decline in international market demand has also affected countries with relatively low costs. In the first three quarters of 2022, China's export of fabrics to ASEAN increased by 22% year on year, compared with 0% in October and 11% in November. On the other hand, it indicates that the subsequent clothing orders from ASEAN will enter the downward channel in the first quarter of this year.
The pulling effect of price on export amount will be further weakened
In December 2022, the average index of China's export container freight rate was 1358.63, down 61.3% from the highest point in January, greatly easing the pressure on freight costs. It is expected that the freight rate will further return to the pre-epidemic level in 2023. At the end of 2022, the price of cotton fell 35.5% year on year, the price of cotton yarn fell 19.6%, and the price of polyester filament and staple fiber fluctuated within ± 3% year on year. With the improvement of China's economic fundamentals and the start of domestic consumption, the price of raw materials will stop falling and rebound in 2023. In 2022, the exchange rate of the RMB against the US dollar depreciated by 8.32%, the largest annual decline since 1994. In the new year, the RMB exchange rate is expected to enter the appreciation channel, which will have a negative impact on export competitiveness and profits.
The trend of "de-chinesization" is the main uncertain factor in the future
The trend of "Friendly Shore Outsourcing" and "decoupling and chain breaking" in the United States and western countries is becoming increasingly fierce. The "Xinjiang Related Act" implemented in June 2022 severely hit the willingness of American buyers to import from China. It not only significantly adjusted the procurement strategy of cotton products, but also affected the export of other products to the United States. According to the report released by the American Fashion Industry Association in July 2022, 80% of American enterprises plan to continue to reduce their purchases from China in the next two years, and this proportion will be 63% in 2021. 86% of American enterprises plan to reduce the purchase of cotton clothing from China, and 45% of American enterprises plan to reduce the purchase of non-cotton clothing from China. In response to the restrictive measures of the United States, on June 9, 2022, the European Parliament passed the Resolution on Customs Measures against Forced Labour by a high vote. On September 14, the European Commission announced the draft Regulation on the Prohibition of Forced Labour Products in the European Market. On January 1, 2023, Germany formally implemented the Supply Chain Enterprise Due Diligence Act. Recently, the United States Customs and Border Protection Bureau also cited the "Cracking down on the United States Counterpart through Sanctions", which will detain the goods of three Chinese enterprises at the port of entry from March 14, 2023 on the basis of "involving Korean labor".
The trend of industrial transfer is obvious, and the transformation and upgrading need to be accelerated
At present, no matter in terms of capacity scale, product structure or industrial chain integrity, the overseas supply chain can not form a fundamental challenge to China in the short term. Its products are highly concentrated in end consumer goods such as clothing and home textiles. It still needs a process to reach or surpass China in terms of scale or structure. The neighboring countries are highly dependent on textile raw materials, especially chemical fiber products, produced in China. Vietnam, Bangladesh and other countries import more than 60% of their textile raw materials from China. We should take full advantage of the opportunity that neighboring countries still have a high degree of dependence on China, take advantage of the RCEP opportunity, rationally distribute industries and trade, accelerate transformation and upgrading, and try to avoid the negative impact of too fast industrial transfer.
China's clothing export industry still has strong endogenous competitiveness
First, China has a complete textile and clothing industry chain and an efficient supply chain. Second, China has comprehensive advantages of software and hardware, which to some extent offset the disadvantages of labor costs. Third, there is sufficient momentum for the development of new forms of foreign trade. Cross-border e-commerce and other new business forms have high requirements for rapid response and flexible production. In recent years, it is based on China's flexible, efficient and highly digitalized manufacturing industry that has achieved rapid development. However, the capacity of Southeast Asian countries is concentrated in large quantities of basic products, and it is still difficult to bear the trade model of "small, fast and flexible". Fourth, the implementation of RCEP will help China and ASEAN, the two largest textile and garment production centers in the world, further integrate, realize the large circulation in the RCEP region, and complete the development and leap from "RCEP manufacturing" to "RCEP consumption" to "RCEP brand". Fifthly, China's huge single market size has provided a continuous development impetus for the industry's capacity and development space.
In 2023, the external environment will be more complex and severe, with more uncertain and unstable factors. The shortage of external demand will become a prominent challenge. The impact of the historical high base will continue to emerge, and the operation of foreign trade in clothing will be further under pressure. The downward pressure on exports in the first half of the year, especially in the first quarter, is large, and it is expected to continue or even intensify the negative growth trend in the fourth quarter of 2022 (the export of clothing in 2022Q4 will decline by 13.9% year-on-year). At the same time, it should also be noted that after decades of development, China has obvious competitive advantages in the global textile and clothing supply chain, and is in a core position in the Asian supply chain. In particular, China's economy will achieve an overall improvement in 2023, providing strong support for stabilizing foreign trade. In the future, on the one hand, we should strive to promote the steady increase of the international market share of high-value-added products, on the other hand, we should also avoid the rapid decline of the international market share of low-end products. On the basis of maintaining the basic stability of export scale, accelerate the transformation and upgrading of the industry, explore the innovative growth points of trade, improve the comprehensive competitiveness, and realize the high-quality development of clothing export.