According to the International Textile Manufacturers Federation (ITMF), since July 2022, "weakening demand" has become a major concern across the global textile value chain more than ever before.
Since July 2022, weakening demand has been a major concern across the global textile value chain, due to relatively high inventory accumulated during 2022. Other concerns include inflation, high energy prices, and plateauing material prices.
Weakening demand is a major concern across all regions, but in North America and Central America, it is overshadowed by "inflation." In all other regions, 'inflation' is considered the second biggest concern. For companies in East Asia, 'high energy prices' and 'plateauing material prices' also remain an issue. This is also the case in Southeast Asia, South Asia, and Africa. For respondents operating in Europe (including Turkey) and the Americas, the weight of these concerns (i.e., high energy and raw material prices) has strongly decreased. In Europe (including Turkey), "high energy prices" remain relatively worrying, but there is a clear shift towards "geopolitics" and "rising interest rates."
All sectors are affected by weakening demand and are concerned that it will not improve in the next six months. Textile machinery producers are also concerned about "inflation," "plateauing material costs," and "geopolitics." Fiber producers are strongly focused on 'high energy prices,' while spinning mills would rather focus on 'inflation,' 'rising interest rates,' and 'geopolitics.' Weavers/knitters and chemical fiber producers' concerns strongly lean towards "inflation" and "high energy prices."
01
US March retail sales slowed more than expected.
US retail sales fell for a second consecutive month in March. This suggests that household spending in the US is cooling as inflation persists and borrowing costs rise.
Data released by the US Department of Commerce on the 14th showed that retail sales fell 1% month-on-month in March, compared to a market expectation of a 0.4% decline. At the same time, the February data was revised upwards from -0.4% to -0.2%. Year-on-year, retail sales increased by only 2.9%, the lowest growth rate since June 2020.
The decline in March retail sales came against a backdrop of shrinking sales in motor vehicles and parts, electronics, household appliances, and large general merchandise stores. However, the data shows that sales in food and beverage stores only declined slightly.
This data further indicates that household spending and overall economic momentum are slowing as the financial environment tightens and inflation persists.
Some Americans are starting to tighten their belts to make ends meet. Another data released last week by Bank of America showed that credit and debit card usage fell to a two-year low last month as slower wage growth, reduced tax refunds, and the end of pandemic-era benefits put pressure on spending.
02
Over 50,000 US physical stores may close.
UBS believes that the brief post-pandemic revival of physical retail stores in the US may be over due to tightening macroeconomic conditions and growing demand for online shopping.
UBS analyst Michael Lasser predicts that US retailers could close over 50,000 stores by the end of 2027.
Lasser wrote in a research report: "Store closures will accelerate due to slower consumer spending, reduced credit availability, and rising e-commerce penetration." He added that small, independent retailers will be hit hardest by the economic slowdown. Over 40,000 stores with fewer than 20 employees have closed in the past 10 years.
UBS estimates that US retailers closed more than 2,000 stores in the past year alone, impacting large chains such as 3B Home, Foot Locker, and Best Buy, as well as smaller mom-and-pop stores.
According to the US Chamber of Commerce's Small Business Index, more than half of small businesses say inflation remains their biggest challenge. These businesses have been struggling to stay afloat as operating costs increase and profit margins shrink.
03
Asian March shipments to the US
Container volume decreased by 31.5% year-on-year.
Weak US consumption and retail sector still facing inventory pressure.
According to a Nikkei report on April 17, data released by US research firm Descartes Datamyne showed that the volume of seaborne container shipping from Asia to the US in March this year was 1,217,509 (in 20-foot equivalent units), a year-on-year decrease of 31.5%. The decrease widened compared to February (29%).
An executive at a major container shipping company said, "It feels like the cargo volume has decreased, and competition has become fiercer."
In addition, inventories accumulated by various retail companies have not been digested. Toys, sporting goods, and footwear decreased by 49%, and clothing decreased by 40%, both maintaining a significant decrease. In addition, the decrease in materials and parts such as plastics (decrease of 30%) also expanded compared to the previous month.
Descartes' report points out that the volume of furniture, toys, sporting goods, and footwear in March decreased by nearly half, and the container volume from ten Asian countries and regions to the US was all lower than the same period last year. Among them, China, which has the highest market share, decreased by 40% year-on-year, and Southeast Asian countries also shrank significantly, with Vietnam decreasing by 31% year-on-year and Thailand decreasing by 32%.
Summary
In summary, end-demand is weakening, and new orders are insufficient, especially the foreign trade orders have shrunk significantly. For weaving enterprises in the middle, with new orders not yet improving, a mentality of reducing burden is beginning to emerge.
