The GDP in the first quarter of 2023 was 28,499.7 billion yuan. Calculated at constant prices, it increased by 4.5% year-on-year and 2.2% quarter-on-quarter compared with the fourth quarter of 2022. The degree of economic recovery exceeded the market’s general expectations. The textile and apparel industry is a typical procyclical industry and is greatly affected by economic fluctuations.
According to data released by the General Administration of Customs, from January to March 2023, the cumulative exports of textiles and clothing were 462.3 billion yuan, an increase of 0.71% over the same period last year (the same below), of which textile exports were 220.45 billion yuan, a decrease of 5.1%, and clothing exports were 241.85 billion yuan. , an increase of 6.7%.
How will the textile and apparel industry perform next? Can we catch the fast train of economic recovery? This can be seen from the terminal consumption and export data.
Domestic demand: continuous improvement, textile and apparel industry data performed outstandingly
In terms of domestic demand, among commodity consumption, the retail sales of textiles and clothing performed more prominently, with a year-on-year growth of 12.7% in the first quarter, and a year-on-year growth of 17.7% in March. Although there was the impact of a low base last year, from a horizontal comparison, the growth rate of the textile and clothing retail sales data was second only to the gold, silver and jewelry category, and much higher than the overall social retail sales, indicating that the consumption recovery in the textile and apparel industry is at a rapid and rapid pace. Both have strong advantages in strength.
External demand: Exports are weak and improved significantly in March
In terms of external demand, the overall situation of textile and clothing exports in the first quarter was weaker than last year, but it was similar to the changes in domestic demand and achieved great improvement in March.
Structure: The terminal is stronger than the upstream, and the growth of home textiles is gratifying
First of all, from the comparison of upstream and downstream growth, terminal clothing consumption and the upstream textile and fiber industry performed slightly better. However, the profit situation of the upstream textile and chemical fiber industries is not optimistic due to high inventory and other factors. Most products are in a loss-making state, and the overall trend is that the terminal is larger than the upstream. On the other hand, there is a big differentiation between terminal clothing sales sectors, and the situation of home textiles is better than that of mid-to-low-end.
In the first three months, China’s home textile exports were US$7.51 billion, an increase of 1.1%. Among them, exports in March were US$3.1 billion, an increase of 27.5%. Judging from the data, after the fluctuations during the Spring Festival and the end of domestic epidemic control, the monthly export scale has once again returned to the relatively high export level of more than US$3 billion per month in the fourth quarter of last year. The top four markets for my country’s home textile exports are the United States, the European Union, ASEAN and Japan. In the first quarter of this year, China’s home textile exports to the US and European markets experienced a significant decline, with export volumes of US$2.12 billion and US$820 million respectively, a decrease of 14.9%. and 20.6%; exports to Japan were US$600 million, a decrease of 7.3%; exports to ASEAN were US$1.16 billion, an increase of 54%. Among other major markets, China’s exports to Singapore increased by 3.9 times, exports to Saudi Arabia increased by 38.3%, and exports to Australia increased by 18.7%.
Zhejiang, Jiangsu, Shandong, Guangdong and Shanghai rank among the top five home textile export provinces and cities in the country. Among them, only Guangdong’s exports increased by 39.8%, and exports from other provinces and cities showed a downward trend. Jiangsu and Shanghai’s exports fell significantly, by 16.8% and 16.3% respectively. Zhejiang and Shandong’s exports declined slightly, by 3.7% and 5.5% respectively. Among other provinces and cities, exports from Hunan and Xinjiang grew rapidly, increasing by 1.3 times and 2.2 times respectively. In addition, Guangdong’s exports are growing rapidly and are still mainly targeting the Singapore and Australian markets.
Outlook: The pattern of “strong internally and weak externally” continues and continues to recover
The market has strong consensus expectations for the recovery of domestic demand. Although the social zero data has a certain lag, the first quarter data presented has shown an obvious recovery trend. Analyzing consumption in the second quarter, as the weather gets warmer and the first short holiday arrives, residents’ willingness to travel increases, which is expected to give a strong boost to the clothing consumption market, and year-on-year data will continue to improve. However, on a quarter-on-quarter basis, as the second quarter enters summer, summer clothing and winter clothing are difficult to compare in unit price, and the quarter-on-quarter growth is expected to slow down.
Exports are expected to grow, but there is uncertainty about the pace, which mainly depends on when the European and American economic recession will arrive. First of all, from a seasonal perspective (Figure 3), the first quarter and April to May are relatively off-season for exports, so there is still room for export growth with the arrival of the peak export season. Secondly, judging from the inventory data and inventory-to-sales ratio data of U.S. apparel wholesalers in Figure 4, the inventory-to-sales ratio has entered a clear downward path, and inventory pressure has gradually eased. But as mentioned above, due to the existence of greater macro risks, the market has different opinions on the timing of the economic recession. And judging from the current extent of inventory decline, the inventory inflection point is likely to be later than the end of the second quarter as previously predicted. Therefore, we are cautiously optimistic about future exports. Exports in the second quarter or even the whole year are likely to show weak growth.
Overall, textile and apparel consumption showed a recovery trend in the first quarter. Textile and apparel exports and total retail sales of consumer goods both experienced unexpected growth in March, sending optimistic signals for the recovery of consumption in the next three quarters. However, due to expectations of economic recession in Europe and the United States, exports are still weaker than domestic consumption, and “strong internally and weak externally” throughout the year is a relatively certain trend.
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