Global demand for textiles recovered in Q2 and Q3 2021 but remained significantly below its pre-pandemic levels on all key metrics in both major manufacturing countries and final markets.
In Asia Pacific, manufacturing activity and exports bounced back firmly before hitting a plateau due to a mix of rising Covid-19 cases hitting local production and supply constraints (power outages, saturated port infrastructure). Local production was stimulated by a strong and steady recovery in exports to North America, where retail sales of apparel have been standing at about 10% above their 2019 levels. In Europe, however, apparel retail sales have remained muted, down 10-20% below their past levels despite strong consumer spending on other discretionary items (consumer electronics, appliances, furniture, toys etc.). The same applies for most other large emerging economies (Russia, Brazil, South Africa) where demand is being dragged down by limited government support to the consumer as well as rising import costs (depreciation of local currencies vs the US dollar).
In Europe, textile manufacturing is still down 5-10% from its past levels in Italy, Germany and France, the region’s main producers. Demand from the industrial sector (automotive, construction, aerospace) has been generally strong but hampered by production cuts related to component shortages. Of note, Italian and French exports have been particularly dynamic in line with booming consumption of luxury goods in most international markets.
Looking forward to 2022, we anticipate the risk environment to remain particularly challenging:
- On the demand side, there is a risk that the pandemic has changed habits for good for a fraction of consumers. Remote office, preference for time spent at home etc. could explain why apparel retail sales have so far failed to return to what they were.
- Demand will also remain vulnerable to external shocks - additional sanitary restrictions related to the Covid-19 pandemic have a noticeable and strong adverse impact on final demand.
- The global sanitary crisis could also continue to disrupt supply chains – in particular, manufacturing and transport activities in Asia Pacific.
- Input prices (cotton, synthetic fibers) are expected to soften, but remain at elevated levels throughout 2022.
- Trends that were already at play before the pandemic, such as the rise of e-commerce and direct-to-consumer brands or the growing market for second-hand goods, are expected to further gain momentum and are major challenges the industry will have to address in the next few years.