Results from ITMF’s Global Textile Industry Survey – March 2024
Dr. Christian Schindler
Director General
International Textile Manufacturers Federation (ITMF)
Business situation remains dire
The 25th ITMF Global Textile Industry Survey (GTIS) was conducted in the middle of March 2024. On average 48% of survey participants judged their business situation as poor (see Graph 1). 40% regarded it as satisfactory. But only 13% perceived it as good. The balance between good (+13%) and poor (-48%) resulted in a balance of -35 percentage points (pp).
After the business situation had improved to -29pp in January 2024 from a low point of -46pp in November 2023, the hope was there for a trend of continuous improvement. This did not materialize (yet). It seems rather that companies along the entire textile value chain continue finding themselves in a very dire business environment. Since May 2023 the business situation is fluctuating between -25 and -45pp (see Graph 4).
Since the beginning of January 2023 expectations in the industry were such that business will improve in six months’ time (see Article 2). The reason for this optimism was initially based on China’s opening of the economy after ending its Zero-Covid-policy at the end of 2022. While China’s economy grew by +5.2% in 2023, the expectation was that its growth rate would be even higher. During 2023 companies’ business expectations remained in positive territory fluctuating around +20pp before rising to almost +30pp in November 2023 and January 2024. The optimism during 2023 was based mainly on the expectations that inflation continues falling rapidly which would strengthen disposable income of consumers and hence would give demand a positive push.
But order intake along the textile value chain did not pick up during 2023. The main reason for this can be seen in the inventory build-up in the apparel and textile retail and wholesale sector in the USA and Europe since the middle of 2021 and which peaked in the middle of 2023 (see below chapter “Inventories in the textile chain deemed average – Inventories at wholesale level visibly came down”). In the last few months, the inventory levels in the USA were reduced and are nearing the long-term average. This lifts the probability that brands and retailers will start ordering more in the coming months.
A regional perspective reveals that South-East and South Asia saw their business situation improve visibly in March compared to January 2024 (see Graph 2). The business situation in South Asia improved mainly based on a strong domestic economy in India and despite the economic challenges in Pakistan. In North & Central America and especially in South America the business situation deteriorated significantly again in March 2024 after a strong improvement in January 2024. This comes somewhat as a surprise. In North America the US-economy grew by +2.5%, and in South America Brazil’s economic growth reached +2.9%. In Europe, companies are still confronted with a difficult business environment. The economic growth in the EU reached only +1.0% in 2023. The region was struggling with relative high inflation rates fuelled by high energy prices in the aftermath of Russia’s invasion of Ukraine. The business situation in East Asia continues fluctuating between -40% and -60%. While the Chinese economy grew by +5.2% in 2023, the textile industry struggled with relative weak exports and subdued domestic demand in a deflationary environment. In Africa the business situation improved but remained also in negative territory.
What stands out when looking at the different segments (see Graph 3), is that the upstream segments – fiber producers, spinners, and weavers/knitters – found themselves in a better business situation in March 2024 compared to January 2024. Why weavers/knitters even reached positive territory is difficult to explain. But this might be interpreted as a first sign that more orders are reaching the value chain. The textile chemical producers did not see an improvement while dyers / finishers / printers experienced a slight upward move. All downstream segments – garment, home textile and technical textile producers – stood at around -20pp in March 2024. While home textile producers recorded a deterioration, technical textile producers’ business situation improved markedly albeit from a very low level. The segment that is struggling the most is the textile machinery segment with a new low at around -60pp.
Business expectations stay cautiously positive
The business expectations remained in positive territory at +25 percentage points (pp), albeit slightly lower than in January 2024 when the balance reached +29pp (see Graph 1 and 2). While 42% of companies expect business to be more favourable in six months’ time, 16% anticipate an even less favourable business environment. 42% of survey participants believe business not to change in the next half year.
That business expectations are hovering between +25 and +30pp since November 23 is a sign of cautious optimism despite weak demand still being by far the major concern faced by survey respondents (mainly due to high prices for raw materials, energy, and logistics, see below chapter “Weak demand was and is THE major concern”).
Inflation rates are still elevated but are receding (disinflation) both in North America and Europe. The inflation rate in the USA stagnated in February at 3.2% compared to January but was much lower compared to last year (6.0%). In Europe inflation rates keep falling. In France inflation dropped from 3.2% in February to 2.3 in March. In Italy the inflation rate of 1.3% in March is already below the ECB-target of 2%. In Germany inflation rate fell also from 2.7% in February to 2.3% in March. Nevertheless, inflation is still holding consumers back to a certain extent. Other factors that are also dampening consumption are geopolitical conflicts and trade tensions. While “geopolitics” as a major concern fell from 41% in January 2024 to 31% in March 2024, the level is still much higher than it was before Russia’s invasion of Ukraine. Therefore, despite low unemployment levels in the USA and Europe, consumer sentiment remains in the contractive area according to the OECD.
Since the beginning of 2022 (Russia’s invasion of Ukraine) consumers in OECD-countries and China became very cautious. Despite improving visibly in the last quarter of 2023, consumer sentiments remained in the contractive area. Nevertheless, this rise could give hope that inventory levels will keep falling to a level where brands and retailers start placing more orders again.
Regional-wise it can be stated that survey participants in all regions are expecting business to be more favourable in six months’ time (see Graph 3). The optimism about the outlook is especially high in South-East Asia (+36pp). In North & Central America as well as in South America business expectations came down from relatively high levels but remained at around +25pp. Europe recorded a visible rise in expectations from +14 to now +27pp. In East Asia companies remained cautiously optimistic at around +10pp. On average, also companies in Africa stayed optimistic about the future albeit less so compared to the previous survey.
When looking at segments, the most optimist segment in March 2024 was the segment of fibre producers (see Graph 4). From already high +54pp in January 2024 their optimism jumped to +69pp in March 2024. Spinners remained very bullish about the outlook at +48pp in March 2024. The largest jump in business expectations was recorded in the segment of weavers/knitters where the balance between more and less favourable surged from +13pp in January to +38pp in March 2024. It remains to be seen whether the relatively good business situation and favourable business expectations in this segment can be interpreted as an early indicator for a better business environment for the entire textile value chain. Textile chemical producers as well as dyers / finishers / printers remained cautiously optimistic. Similarly, also garment, home textile and technical textile producers anticipate business to improve in six months’ time. The optimism about the future in the downstream segments is based on the hope that demand from retailers and brands will eventually return once inventory levels have been reduced to such an extent that more orders must be placed to keep shelves filled with enough merchandise (see below chapter “Inventories in the textile chain deemed average – Inventories at wholesale level visibly came down “).
Order intake remains weak but improved slightly
The balance between “good” and “poor” order intake continued improving in March 2024. In November 2023 the global balance stood at -50 percentage points (pp), improved in January 2024 to -32 pp and reached -26pp in March 2024 (see Graphs 1 and 2).
Expectations about order intake in six months’ time did not change much since the beginning of 2023 but fluctuate around -5pp (see Graph 3). A look at the past shows that order intake is very much correlated to the business situation. With other words, if the balance of good and poor order intake is in negative territory it is very likely that the balance between good and poor business situation is negative too. Nevertheless, despite this general correlation there can be deviations. While order intake improved slightly in March business situation was slightly down.
Unfortunately, the correlation between business expectations and order intake is much weaker. As seen above business expectations in six months’ time returned to positive territory in early 2023 but order intake kept falling until November 2023 (-51pp). Since then, order intake improved but the balance stayed in negative territory.
A significant improvement could be observed in the regions of South-East and South Asia (see Graph 4). In South America too order intake improved markedly despite survey participants having judged the business situation as poor (see Article 1). Order intake in North & Central America dropped from -24pp to -54pp, a level reached already in November 2023. East Asia and Europe experienced a continuation of a very weak order intake with balances of -49pp and -42pp, respectively.
As for the segments, fibre producers and weavers / knitters recorded much better order intakes. Fiber producers’ order intake was up in January 2024 at -8pp from -67pp in November and rose further to +/-0pp in March 2024. Especially, weavers / knitters observed a surge from -50pp in January to +15pp in March 2024. In the downstream segments technical textile producers saw a better order intake in March (-8pp) compared to January (-53pp). Home textile producers saw their order intake deteriorate from -4pp to -26pp while garment producers’ order intake remained at around -10pp.
Weak demand was and is THE major concern
The main concern for survey participants remained – unsurprisingly and once more – “Weak demand” (see Graph 1). This explains the overall bad business situation and the low order intake. 65% of participants chose weak demand as main concern in March 2024, down only 2 percentage points from January 2024. Since business expectations are still cautiously positive, the main factor for better business will be retailers and brands placing more orders.
With 36%, “High raw material prices” was the next biggest concern (up from only 22% in January). Producers along the supply chain are struggling with higher input prices, including raw materials, that were and are still driven by energy prices. Since inflation is coming down in most countries, it can be hoped that price pressure from that direction will ease.
While down to 31% in March from 41% in January, “Geopolitics” was still a major concern. The war in Ukraine (higher energy and food prices) and in Gaza (higher logistic costs) certainly do not help to improve the consumer and business sentiments.
“High energy prices” also saw a rebound from 23% to 30% in March 2024. The uncertainty about “Geopolitics” is driving energy prices up. In many Asian countries energy prices have increased or remain relatively high. Ending the geopolitical tensions (Ukraine, Gaza, etc.) would bring energy prices down and provide a boost to the global economy.
The concern about “High logistic costs” fell slightly from 24% to 21%. The attacks by Houthi in the Red Sea continue causing higher shipping costs (shipping lines avoid the Suez Canal) and delays in the supply chain which cause additional costs. For different reason (drought in Panama) the lower capacity of the Panama Canal led to higher transportation costs and delays.
Similarly, “Inflation” as a concern decreased from 29% to 27%. As outlined earlier on, inflation is coming down in both North America and Europe. This is helping to improve the disposable income of consumers that are seeing their real wages rising after significant nominal wage increases.
Interestingly, “Rising interest rates” were again not a big concern as they dropped from 15% to 11%. The vast majority is currently not in an investment mood which reflects the bad business situation and order intake of textile machinery companies.
It should be mentioned that “Sustainability regulation” saw a jump from a low level of 7% to 13%. This reflects that more and more companies are becoming aware of the regulation the textile industry will have to deal with in the coming years.
Inventories in the textile chain deemed average – Inventories at wholesale level visibly came down
A vast majority of companies (57%) deemed their inventory levels as average (see Graph 1). This is 4 percentage points (pp) lower than in January 2024, which resulted in a higher number of companies (+4pp) having high inventories (up from 15 to 19%). Survey participants who judged their inventories as low remained unchanged at 28%.
Since September 2022 “Weak demand” is the major concern for companies along the entire textile value chain. The main reason for this is the inventory build-up by retailers and brands in many Western countries during 2021 and 2022. Retailers and brands were worried that after the lockdowns in 2020 the strong pent-up demand which was supported by fiscal and monetary policy measures would be difficult to meet due to disrupted supply chains. Consequently, brands and retailers ordered more than necessary to be prioritized by suppliers. This led to surging inventory levels in the USA during 2022 up to a peak that was almost 30% higher than the long-term average (see Graph 4). When pent-up demand was served “normal” demand started falling in 2022. This trend was accelerated by rising inflation levels caused by the disruptions of the supply chains in the aftermath of the pandemic that led to an enormous mismatch between demand and supply.
In addition, Russia’s invasion of Ukraine led to higher energy and food prices, especially in Europe, which pushed inflation rates even higher. As can been observed in Graph 4, the inventories of wholesalers in the USA have been falling continuously since March 2023 and has almost reached the pre-pandemic level. Interestingly, the retail inventories in the USA did not fall significantly – unlike wholesales – after having reached a peak in August 2023.
Nevertheless, the overall development signals that inventory levels will continue falling to levels where brands and retailers will start placing more orders again. Whether this will be – hopefully – in the 3rd or 4th quarter of 2024 or only in 2025, remains to be seen.
