In the first half of this year, the global economic recovery slowed down. Global inflation and monetary contraction, geopolitical risks, repeated outbreaks of the pandemic, high raw material costs, and a temporary decline in overall market demand, coupled with pressure on product prices, seriously affected the normal production and operation of the home textile industry. Despite unprecedented multiple pressures, the home textile industry persevered. By June of this year, various economic indicators had recovered to the level of the same period last year, demonstrating the industry's resilience to pressure.
I. Overall Pressure on Industry Operation
Since the beginning of this year, industry profits have fallen sharply due to pressure from raw material costs, logistical pressures caused by multiple domestic outbreaks of the pandemic, and limited enterprise orders. After May, with the improvement of the domestic epidemic prevention and control situation and the gradual effectiveness of the national package of policies to stabilize growth, the operation of the home textile industry has gradually recovered. According to data from the National Bureau of Statistics, the operating income of major home textile enterprises nationwide in the first half of the year increased slightly by 0.08% year-on-year, and profits narrowed from -34% at the beginning of the year to a slight increase of 1.74% year-on-year from January to June.
(I) Slowdown in Export Growth
Since 2022, the growth rate of China's home textile exports has shown an overall narrowing trend. According to data from the General Administration of Customs, from January to June, China exported US$22.68 billion worth of home textile products, an increase of 3.48% year-on-year, with export volume decreasing by 2.55% year-on-year and export unit price increasing by 6.18% year-on-year. Overall, the situation shows a slowdown in the growth rate of export value, a change from positive to negative year-on-year growth in export volume, and a high year-on-year growth in export unit price.
Looking at the six major categories of home textile products that are primarily exported, except for bedding, the export value of other categories of home textile products showed positive growth.
From the perspective of major export markets, the growth rate of traditional markets in the US, Europe, and Japan was lower than that of other markets. From January to June this year, China's exports of home textile products to the US, European and Japanese markets reached US$9.598 billion, down 4.23% year-on-year, while exports to other markets reached US$13.07 billion, up 9.97% year-on-year.
(II) Domestic Sales Pressure and Recovery
According to data from the National Bureau of Statistics, the domestic sales value of major home textile enterprises nationwide from January to June this year increased by 2.39% year-on-year. Due to the domestic epidemic lockdowns in March and April this year, leading to a standstill in production and business operations, domestic sales decreased significantly year-on-year. After May, as the domestic epidemic was gradually brought under effective control and production and business operations gradually resumed, the overall recovery process slowed down. According to the results of the "Second Quarter Enterprise Operation and Management Questionnaire Survey" conducted by China National Textile and Apparel Council, the new order index of home textile enterprises in the second quarter was 39.35, a slight increase of 0.5 points compared with the first quarter.
II. Major Problems and Trend Predictions Facing the Industry
(I) Insufficient Market Orders is the Primary Problem
Home textile companies generally believe that the reduction in market orders is the primary problem they face, which is particularly evident for small and medium-sized enterprises. In the first half of this year, due to the multiple outbreaks and lockdowns of the domestic epidemic, there were regional and temporary work stoppages in home textile industry enterprises. According to the results of the "Questionnaire Survey on Enterprise Production and Operation and Problems Faced" conducted by the China Home Textile Association, a high proportion of home textile enterprises experienced work stoppages ranging from two weeks to one month, accounting for 54%. The main factors for enterprise shutdowns were epidemic lockdowns, insufficient orders, and insufficient raw material supply. Simultaneously, "fluctuations in the epidemic affecting production and life" was also a major problem encountered in domestic sales reported by the surveyed enterprises.
The reduction in orders led to an increase in enterprise inventories in the second quarter. According to the results of the "Enterprise Operation and Management Questionnaire Survey" conducted by the China National Textile and Apparel Council, the proportion of enterprises with increased finished product inventories in the second quarter reached 63.6%.
(II) Cautiously Optimistic Prediction for the Third Quarter
According to the results of the "Second Quarter Enterprise Operation and Management Questionnaire Survey" conducted by the China National Textile and Apparel Council, 34.4% of home textile enterprises expect an increase in order demand in the third quarter, which is a slightly larger increase of 1.1 percentage points compared to the enterprises that expected an increase in order demand in the second quarter. 51.6% of enterprises believe that the output of their main products will increase in the third quarter, exceeding the "increase in output" of enterprises in the second quarter by 18.3 percentage points. 18.2% of enterprises are optimistic about the overall operation of the industry in the third quarter, an increase of 9.1 percentage points compared to the second quarter. 33.3% of enterprises expect a less optimistic outlook, which is a decrease of 3.1 percentage points compared to the second quarter. Overall, home textile enterprises are cautiously optimistic about the industry's operation in the third quarter.
