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Global apparel trade contracts 1%: ICRA

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Global apparel trade remains under pressure, having contracted by 1 per cent to US $ 432 billion in FY 2016, following a 5 per cent de-growth in 2015, owing to subdued demand trends reported by the key importing countries. This has been stated in a report by ICRA, an Indian independent and professional investment information and credit rating agency.

While the volumetric growth remained marginally positive, primarily aided by recovery in demand from Europe, the realisations experienced a decline. The implied decline in realisations is partially explained by the increasing share of lower-priced man-made-fibre-based apparels. Further, the decline can also be an outcome of a change in product mix towards lower value-added products.

However, a reversal trend was observed in 2016 with a recovery in imports by Europe compensating for a subdued demand from the US. Moreover, the latest trends are not encouraging, and point towards a modest recovery only.

Also ReadIndian textile exports to increase by 6% in FY ’17: ICRA

Despite the decline in global apparel trade for two consecutive years, Asian apparel exporters like Bangladesh, Cambodia, and Vietnam continue to grow, though the pace of growth has moderated. Bangladesh remains the second largest apparel exporter after China. Its apparel exports are estimated to have increased by 3 per cent in FY 2016, translating into a 7 per cent share in global exports.

Bangladesh’s growth continues to be supported by the availability of low-cost labour and benefits under Free Trade Agreement (FTA) with EU in the form of lower import duties. Similarly, Vietnam continued to grow in 2016, with its apparel exports to the US increasing by 2 per cent in FY 2016 despite a 6% decline in total apparel imports of the country.

However, ICRA notes that Vietnam’s prospects have weakened subsequent to the change in government in USA and scrapping of the proposed Trans Pacific Partnership (TPP). This proposed free trade agreement with the US had played a key role in propelling investments in Vietnam’s textile industry and apparel exports to the US. This development, however, augurs well for India, as the risk of increased competition from Vietnam has abated for now.

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