Global economic growth outlook broadly lowered
On June 6, the World Bank released its latest Global Economic Prospects report, projecting that global economic growth will fall from 3.1% in 2022 to 2.1% in 2023. Specifically, growth in advanced economies is expected to fall from 2.6% in 2022 to 0.7% in 2023; growth in emerging market and developing economies, excluding China, is expected to fall from 4.1% in 2022 to 2.9% in 2023. U.S. economic growth is projected to be 1.1% and 0.8% in 2023 and 2024, respectively. Eurozone economic growth is expected to slow from 3.5% in 2022 to 0.4% in 2023.
U.S. final consumption remains resilient; inventory pressure persists
In May, the U.S. CPI rose 4.0% year-on-year, the smallest increase since March 2021. Retail sales of clothing remained stable, indicating that while U.S. consumption is in a moderate cooling phase, it still shows considerable resilience. The U.S. clothing inventory-to-sales ratio continued to fall by 0.8% in April, indicating that retailers are still in a de-stocking cycle. 36% of companies expect inventory levels to return to normal in the second half of the year, while 21% expect inventory problems to persist into the first half of 2024. Data from Descartes Datamyne also shows that the volume of sea containers shipped from Asia to the U.S. in May decreased by 20% year-on-year, with clothing down 27%. Excess inventory in the U.S. retail industry remains unresolved, and demand for consumer goods imports continues to be weak.
Eurozone household consumption sluggish; technical recession occurs
In May, Eurozone CPI rose 6.1% year-on-year, a significant drop from the previous 7.0%, with inflation cooling faster than expected, but remaining high. The Eurozone experienced negative GDP growth for two consecutive quarters, resulting in a slight "technical recession," casting a shadow on the EU's economic performance. Germany, the EU's largest economy, has also experienced negative GDP growth for two consecutive quarters. Eurostat said that in the first quarter of this year, a 0.3% drop in household consumption weighed on the Eurozone economy, while government spending fell 1.6%, and inventory of goods hampered economic growth. In April, Eurozone retail sales were flat, as high inflation and concerns about an economic slowdown continued to dampen household spending.
Yen purchasing power falls to historic low
Since the beginning of the year, the yen has fallen nearly 9% against the dollar, with the yen's external purchasing power falling to its lowest level in nearly 50 years. Data from Japan's Ministry of Internal Affairs and Communications shows that Japan's CPI rose 3.2% year-on-year in May, marking the 21st consecutive month of year-on-year increases. In April, average monthly real household consumption expenditure fell 4.4% year-on-year, marking the second consecutive month of decline and the largest decline since February 2021 (6.5%). From January to April, Japan's textile and clothing retail sales totaled ¥2.8 trillion, up 2.5% year-on-year, but still down 22.1% compared to the same period in 2019.
Looking ahead to the second half of the year, export prospects present both challenges and opportunities. Opportunities include: 1) Market inventory pressure is expected to ease, and demand is expected to emerge from the trough. Maersk stated that import demand will lag behind consumer demand until excess inventories accumulated in 2022 are sold. It is expected that if consumption continues at the current level, the inventory backlog will be reduced and import demand will pick up sometime this year, with a rebound in the second half of the year compared to the first half. 2) Emerging markets present growth opportunities, and businesses can adjust their layouts in a timely manner. For example, following the Russia-Ukraine crisis, some brands have withdrawn from the Russian market, creating a significant market gap, which also provides opportunities for Chinese businesses to develop the Russian and Central Asian markets. 3) Since the implementation of RCEP, ASEAN has become a highlight of China's clothing export growth, with clothing exports to ASEAN in the first five months increasing by 47.6% compared to the same period in 2021 (yarn and fabric exports to ASEAN increased by only 8.4% during the same period). RCEP continues to release dividends, coupled with strong economic growth in Southeast Asia, the development potential of new business models such as cross-border e-commerce is huge, and even with a clear trend of industrial transfer, it remains an important destination for Chinese clothing brands to go global. 4) Cross-border e-commerce exports continue to maintain relatively rapid growth, to some extent offsetting the decline in traditional trade exports. Temu has surpassed Shein to become the world's largest downloaded shopping application, and U.S. consumers spent 20% more on Temu than Shein in May. According to foreign media reports, Shein expects sales to grow by 40% this year. E-commerce companies going global through platforms such as TikTok and Amazon also maintain strong momentum. 5) Since the beginning of this year, the RMB has depreciated by nearly 4% against the dollar, giving foreign trade companies a certain competitive advantage, helping to improve export profits, and also helping to stabilize orders and markets. 6) The low-base effect of the decline in China's clothing exports since September last year will support exports in the second half of this year, especially in the fourth quarter, leading to a situation where exports are low in the beginning and high towards the end.
Challenges include: 1) Whether the global economy can stabilize and when demand will recover; 2) Uncertainty regarding U.S.-EU trade rules; and 3) Exchange rate fluctuations. The industry and businesses need to be prepared for these challenges, closely monitor them and deal with them appropriately.
In the post-pandemic era, the global apparel supply chain has undergone profound adjustments, with significant changes in the international political and economic environment, trade patterns, and market rules. Apparel exporting companies face unprecedented challenges. It is believed that with the support of the country's policies to stabilize foreign trade, China's apparel export industry will be able to withstand the pressure and overcome obstacles, stabilize existing markets, and open up new development space.
