Apparel production in developing countries saw a 4.3% rise year-on-year in the second quarter

Apparel production in developing countries saw a 4.3% rise year-on-year in the second quarter

World apparel and textile production growth in the second quarter depicts a mixed picture, reflecting wider challenges in the global economy.

In the latest of its quarterly updates on ‘World Manufacturing Production,’ the United Nations Industrial Development Organization (UNIDO) forecasts a rise of 3.5% in total world manufacturing for 2015, despite declining trends in key emerging industrial economies, especially in China. It also warns regional conflicts, especially in the Middle East and North Africa, and financial instability in Europe, may adversely affect growth.

Its caution is confirmed by a “mere” 2.5% year-on-year rise in global manufacturing output in the second quarter of 2015, a fall of 0.2% in the quarter before.

The good news is that both textiles and apparel output rose faster than the world manufacturing average, coming in at 3.0% for each in the second quarter, compared with the same period last year. Leather, leather products and footwear saw growth of 1.0%.

Within this, textiles production rose 4.4% year-on-year in developing countries, but declined 1.4% in the industrialised nations. But output was 1.7% lower than in the first quarter of the year, with a decline of 2.0% in developing countries and a drop of 0.9% in industralised ones.

Apparel production booked a 4.3% rise year-on-year in developing countries and a decline of 0.8% in the industrialised nations. However, compared with the first quarter, world apparel manufacturing was 2.9% lower, with a fall of 4.0% in developing and emerging industrial economies more than offsetting a 0.4% rise in industralised ones.

Compared with the previous year, the production of leather, leather products and footwear grew by 4.0% in the developing and emerging markets, but slipped 6.6% in the industrialised country group. From the first quarter there were declines of 1.7% and 2.5% for developing and industralised countries respectively.

Stronger domestic demand helped lift the production of apparel and textiles in developing and emerging industrial economies, the research suggests. It adds that the production of textiles dropped in Brazil, South Africa and Turkey, but increased in India, Egypt, Mexico and Poland.

Growth path

Looking at world manufacturing production as a whole, UNIDO highlighted that in the United States, manufacturing has benefitted from falling oil prices, which has helped reduce the costs of production and make products more competitive. And eurozone production has become more competitive as a result of a weaker euro in the global market.

According to its estimates, the manufacturing output of industrialised countries rose by 0.7% in the second quarter of 2015. Developing and emerging industrial economies maintained much higher growth, at 5.2% - although this was still a low performance compared to figures seen in the recent past.

Following the global financial crisis, developing countries have been the main engine of global manufacturing growth, but the pace of growth has decelerated over the past few years. Developing countries continue to face difficulties as the US dollar appreciation significantly increases their borrowing costs, at a time when external financial conditions are becoming tighter.

In such an environment, the report suggest structural reform within the manufacturing sector is essential for developing countries to become resilient towards both changes in demand and price variations.

At around 7.1% in the second quarter, China’s manufacturing recorded the lowest growth rate in over a decade, despite the government’s attempts of a policy intervention. Soft demand in both the domestic and external markets, as well as a decline in investment, has had a strong negative impact on China’s manufacturing sector. UNIDO suggests the monetary reforms implemented by the Chinese government may have had the opposite of the desired effect by disrupting China’s growth and unwinding investment.

Meanwhile, in Latin America, the substantial recession across Brazil’s industrial economy has hit manufacturing expansion within the region, with the country encountering a sharp fall of 8.5% in manufacturing output in the second quarter, compared to the same period in the previous year.

A number of Asian economies performed well in the second quarter. The manufacturing output of India grew by 3.6%, Indonesia by 5.4% and Vietnam by 9.9% - having a positive impact on the production of essential goods, including apparel.

As has already been reported extensively on just-style, foreign direct investment is flowing into Vietnam in anticipation of the Trans-Pacific Partnership (TPP) trade deal, which is expected to open up huge opportunities for the country's textile and garment industry. Click on the following link to read more: Textile investments flow into Vietnam ahead of TPP.

Separately, the Organisation for Economic Co-operation and Development (OECD) yesterday (16 September) lowered its forecast for global growth this year, suggesting the slowdown in China, stagnating world trade and deteriorating financial markets are all causing uncertainty.