FreightWaves, a freight intelligence and data analysis website, said that the supply chain is experiencing the bullwhip effect brought about by the new coronavirus epidemic economy and has built up a large amount of inventory. Slowing consumer spending due to inflation and a potential recession will have a huge impact on freight demand and prolong inventory declines.
On May 20, the proportion of containers began to diverge again, this time falling below pre-COVID-19 normal levels, according to SONAR Container Atlas data. Since then, freight volumes have fallen by 8% (green), while container bookings have fallen by 36% (orange).
At the same time, container spot freight rates continue to decline. According to Baltic Freight Index data, weekly container spot freight rates from China to the U.S. West Coast have dropped from $15,764 on April 15 to $9,195 on June 17, a drop of 41%.
As unsaleable inventory accumulates, the probability of shrinking clothing orders in the European and American markets will increase in the future.
With the economic recession caused by inflation, the U.S. apparel industry is wailing. The entire apparel industry was frightened by the supply chain crisis. A large number of American apparel groups increased purchases in the first quarter, and even accepted orders at high cost by air freight. Adding to the inflation factor , causing inventories to remain high in the first quarter.
This time, there are indeed huge delays in the supply chain, which leads to the first point. However, as lockdowns are gradually being lifted around the world at the beginning of the year, American consumers have embraced the real world far beyond the imagination of the retail industry. This has resulted in orders for arrivals in the first quarter still being Purchasing is based on retailers’ “epidemic thinking” – mainly sports, home furnishings, and underwear. In fact, consumers in the first quarter are more keen on occasion wear, which aggravates unsaleable inventory.
Finally, the impact of inflation has a great impact on low-income groups in particular, causing a significant decline in AUCs in the mass apparel market. This has also directly led to the substantial decline in profit performance of most apparel companies despite the increase in AURs driving sales growth. Although the garment industry can quickly adjust orders, the current inventory and some orders in transit are still “epidemic thinking”. This lagging adjustment will take time to digest and will inevitably lead to the resumption of price wars, which may even be the most intense price war in history. First, after all, the shadow of huge inflation still lingers.
The main line of global textile consumption peaking and falling is still continuing in the market game, and the trend on the demand side will not change. U.S. inflation data in May exceeded expectations, with a year-on-year increase of 8.6%. However, clothing CPI continued to diverge from all-goods CPI, falling to 5% year-on-year. Behind the scenes, the price of clothing in the United States has peaked, and its supply and demand pattern is weaker than that of other commodities. The clothing inventory of wholesalers in the United States in April increased by 42.22% year-on-year, and the accumulation of inventory continues. The probability of shrinking clothing orders in the European and American markets will increase in the future. As the main clothing in the European and American markets As a supplier, Bangladesh’s knitted garment export value dropped by 19.7% month-on-month in May.
The proportion of South Africa’s foreign procurement dropped by 21%. Chinese textiles face huge challenges!
On the one hand, it is facing shrinking clothing orders in the European and American markets, and at the same time, it is mixed with the reverse flow of orders from Southeast Asia. On the other hand, the changes in demand in the export market caused by inflation are also having a big impact on the domestic textile market.
The COVID-19 pandemic has had a significant negative impact on South Africa’s economy and trade. In its recent Global Economic Outlook report, the International Monetary Fund (IMF) predicts that the South African economy will grow by 1.9% and 1.4% in 2022 and 2023 respectively, with average inflation rates of 5.7% and 4.6% respectively. However, the international credit rating agency Moody’s predicted in a report in early May that South Africa’s inflation rate would rise to 8% this year due to the impact of the Russia-Ukraine conflict and rising U.S. interest rates.
The main export markets for South Africa’s textiles and clothing are China, Africa and countries in the European Union. According to South African customs statistics, in 2021, my country will be South Africa’s largest export market for textiles and clothing, with textile exports worth approximately R3.853 billion. From the perspective of export product categories, wool textiles are the most important export products of the South African textile industry. In 2021, South Africa imported approximately R23.743 billion in textiles from my country, and approximately R11.712 billion in toys and sportswear.
Recently, South Africa is entering the peak of the fifth wave of the COVID-19 epidemic. Coupled with the frequent occurrence of extreme weather and climate disasters, its business and investment environment has also deteriorated, which has dealt a serious blow to South Africa’s economic recovery. In addition, the current social security situation in South Africa is not yet stable, labor relations remain tense, and strikes occur frequently, posing greater challenges to companies investing in South Africa. At the same time, labor wages and water and electricity prices in South Africa are rising year by year, which directly affects the cost competitiveness of South Africa’s manufacturing industry.
Faced with the current development pressure of the textile and apparel industry, the latest industrial development plan released by the South African Department of Trade and Industry stated that it will increase the domestic market cycle, enhance the demand and supply capacity of the domestic market, and recommends that the proportion of domestic procurement of textiles and apparel be increased. Increase from 44% to 65%, while reducing the proportion of overseas procurement to 35%. Future China�Textile and apparel products entering the South African market will face a more intense competitive environment.
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