Challenging demand environment impact Apparel Imports

07 July  2023, Mumbai

US Readymade Garment Imports Drop by 11.86% in Early 2023

The US import of readymade garments from around the world declined by 11.86% to $13.21 billion in the first two months of 2023 compared to $14.99 billion in the same period last year, according to the US Department of Commerce's Office of Textiles and Apparel.

Trigger point

The decrease in imports is attributed to a combination of factors, including a slowdown in the economy due to the Russia-Ukraine war, high inflation, and interest rates, leading to reduced consumer spending. 

As a result, imports are expected to grow slowly in the coming months.

US apparel imports have experienced a remarkable 27.4% growth in value in 2021 compared to the previous year, driven by a strong US economy and robust consumer demand. This growth surpasses the rebound seen after the 2008 global financial crisis, which was only 13%.

It is anticipated that consumption will gradually recover and reach pre-pandemic levels in the coming years, with a projected value of US$2,007 billion by 2025.

China and Vietnam are the top two importers in the US market, with 21.08% and 18.31% shares, respectively. 

However, China's import of apparel to the US decreased by 29.65%, and Vietnam's readymade garment imports fell by 10.62% in the same period.

Growth faces headwinds

Bangladesh, Indonesia, and Cambodia also experienced declines in their apparel imports to the US, while India's readymade garment exports to the US market grew by 0.41%.

In the European Union (EU), apparel imports decreased by 2.03% in the first two months of 2023 compared to the same period last year. China remained the top supplier with a 26.27% share, but its imports to the EU fell by 13.11%. Bangladesh's imports increased by 5.47% during the same period.

The average price of imported garments in the EU increased, with varying price hikes among different countries. 

Bangladesh saw an 8.75% year-on-year increase in the unit price of garment items, while China had the lowest price hike with 3.97% and Indonesia had the highest with 22.97%.

Dynamic situation

The global market for apparel imports is constantly evolving, and the EU's imports highlight the need to adapt to changing economic conditions.

The US experienced a decline in apparel imports in April 2023, with China's share reducing by 5% since 2021 and India's share increasing by 2%. However, apparel retail sales in the US showed a slight improvement in May 2023.

Similarly, the UK and EU saw decreases in apparel imports, with China and Bangladesh being the top suppliers. The UK showed some diversification in its buying basket, while the EU's diversification was relatively less.

Indian diary

Indian apparel exports continued to decline, with May 2023 exports estimated to be 14% lower than in May 2022. The industry is concerned about the impact of geopolitical events and cautious spending in the EU and US markets.

India's textile and readymade garment exports, as well as gems and jewellery exports, have been declining in recent months, affecting these labor-intensive industries. 

The country's ambitious target of increasing exports to $100 billion in the next five years may be challenging to achieve.

The cotton yarn sector in India has faced challenges due to high prices and import dependency, affecting spinning mills and the knitwear sector. The slowdown in the US and EU markets has also impacted Asian exporting hubs like Tiruppur in India.

The EU

EU Apparel Imports Dropped by 7.62% in Early 2023, Vietnam and India Thrive EU apparel imports from the world experienced a significant decline of 7.62% during January-April 2023, reaching a total of US$29.83 billion.

The number of clothing imports also saw a steep downturn of 15.45%.

Winners and Losers in EU Apparel Imports

Among the top ten sourcing countries for EU apparel, Vietnam and India demonstrated positive growth, while imports from other countries declined notably.

Bangladesh: Decline in Imports

In terms of EU apparel imports from Bangladesh, there was a 6.25% decrease in dollar value, amounting to US$7.06 billion from January to April 2023, compared to US$7.53 billion during the corresponding period in 2022. The number of imports from Bangladesh also declined by 12.48% during this period.

China and Turkey:

Decrease in Imports EU imports from China witnessed a dip of 17.07% in dollar value and 21.05% in quantity. Similarly, during January-April 2023, the EU's imports from Turkey, the third-largest apparel source, declined by 13.68% in value and 24.66% in quantity.

India and Vietnam:

Slight Growth Despite Quantity Decline In contrast, the EU's imports from India and Vietnam experienced slight growth of 0.45% and 3.41%, respectively, in value terms. However, imports from both countries declined by 8.17% and 7.26% in quantity, respectively.

Decline in Imports from Other Sourcing Countries

Simultaneously, the EU's imports from other top sourcing countries, such as Cambodia, Pakistan, Morocco, Sri Lanka, and Indonesia, decreased by 5.59%, 7.52%, 16.61%, 17.16%, and 7.99%, respectively, in value terms.

Unit Price Analysis

Analyzing the unit price (USD value/kg), the EU's cumulative unit price of imports from Bangladesh increased by 7.12% (from US$16.98 to US$18.19). This rise reflects higher raw material and production costs, signaling progress toward the higher price segment. Average unit prices of imports from other countries also experienced an upward trend during the mentioned period.

The State of Fashion 2023: Resilience in the Face of Uncertainty

The seventh annual State of Fashion report, jointly presented by The Business of Fashion and McKinsey & Company, delivers a sobering outlook for the fashion industry in 2023. 

The report highlights a forthcoming global slowdown, attributed to macroeconomic tensions and a decline in consumer confidence, which threaten to erode the gains made in 2022. Moreover, a worldwide recession looms over the fashion industry in the coming year.

Global Slowdown and Recession Expected in Fashion Industry

As the industry grapples with these challenges, inflation emerges as the primary concern. However, opportunities lie in exploring down-cycle exposure and promoting sustainability. 

Fashion executives are anxiously looking toward 2023, as the negative effects of deteriorating macroeconomic and geopolitical conditions in the latter half of 2022 continue to cast a shadow over the industry.

Prognosis

According to the BoF-McKinsey State of Fashion 2023 poll, an overwhelming 85% of fashion executives believe that inflation will continue to pose challenges in the market. 

Additionally, 58% of these executives express concerns about the fashion sector being adversely affected by the energy crisis and disruptions in the supply chain resulting from geopolitical unrest, particularly the ongoing conflict in Ukraine.

In the face of these circumstances, the fashion industry is expected to witness the return of dichotomies that have historically shaped the business. 

McKinsey projects a global sales growth of 5 to 10 percent for luxury items, while the remainder of the industry may experience growth rates ranging from -2 to +3 percent in 2023.

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