China continued to rebound from its decline in October

China continued to rebound from its decline in October

Apparel imports into the US wound down in December as the holiday season came to an end, yet all but two of the leading supplier countries booked growth during the month. Bangladesh and Vietnam both led with double-digit gains, while China continued to rebound from its decline in October.

The latest figures from the Department of Commerce's Office of Textiles and Apparel (OTEXA) show the volume of US apparel imports from all sources grew 5.4% year-on-year in December, down from the 8.5% growth seen in November. However, compared with November's numbers, apparel imports in December were down by 2%. Imports during the month reached 2.02bn square metre equivalents (SME), up from 1.91bn SME in the prior year. In value terms, imports rose 4.7% year-on-year to $6.2bn in December. 

In terms of individual supplier countries, all but two of the top ten recorded growth. Shipments from China – the largest supplier of apparel to the US – increased 4.6% to 808m SME. Nearest rival Vietnam grew 10.7% to 237m SME compared to the same month in the year before. 

And Bangladesh, ranked number three in the top-ten league table, saw apparel shipments rise 18.8% to 144m SME.  

Of the remaining supplier countries, Cambodia recorded the strongest growth at 13.2% to reach 79m SME, followed by India (up 8.6% to 71m SME) and Indonesia (up 5.8% to 91m SME). Year-on-year import gains were also reported by Pakistan (up 1.6% to 46m SME), and El Salvador (up 1.8% to 67m SME).

But declines were seen by Mexico (down 11% to 61m SME), and Honduras (down 1.45% to 90m SME).

Facts behind the figures

While there are concerns that increasing wages are undermining the competitiveness of China's garment production on the world stage, and that manufacturing growth is slowing, the country continues to lead the way when it comes to efficiency and infrastructure.

China remains a compelling source for apparel buyers as rising prices are largely being offset by productivity gains. With its 10,916 garment manufacturers with annual sales above CNY20m (US$3.05m) churning out 29.6bn pieces in 2014, up 1.6% year-on-year, no country can match China in terms of the size of its supply base, its range of skills, its quality levels, its product variety and the completeness of its supply chain.

However, the falling value of the Chinese yuan is being seen as a lever for US brands and retailers to try to drive down product costs, with one analyst describing it as a "tailwind for those sourcing apparel from China". The flipside for retailers and brands shipping in goods to sell in China is to take a hit on margin or increase the price of their products.

Data released last month shows manufacturing activity across all industries in China has declined for seven of the prior eight months. More recent data, published last week, shows the downturn in manufacturing activity in China has extended into 2016, with operating conditions continuing to deteriorate in January for the eleventh month in a row. Both data sets appear to dash hopes that recent government efforts to stimulate the economy through a series of interest rate reductions have started to take effect.

China manufacturing activity declined again in December

China factory activity continues to deteriorate

Vietnam, meanwhile, has benefited as producers and buyers diversify their supply chains, helped by its low labour costs and its industry focus on specialisation, modernisation, and increasing value added.

Foreign direct investment continues to flow into the country, and the recent conclusion of negotiations on the Trans-Pacific Partnership (TPP) trade agreement means Vietnam is expected to be one of the biggest beneficiaries. A recent forecast in Euromonitor International's 'Apparel and Footwear 2016' report singled Vietnam out as one of the most promising markets moving forward. In December, the country finalised its FTA with the EU after nearly two and a half years of talks and 14 rounds of negotiations. 

The Vietnam Textile and Apparel Association (Vitas) is confident the country's garment and textile exports will grow on average by 11.5% per year to 2020, maintaining steady growth.

Vietnam "most promising market" moving forward

Bangladesh's clothing industry also continues to build on its momentum as a low-cost sourcing destination, despite factory safety issues. Since the collapse of the Rana Plaza building in April 2013, two major industry-backed remedial plans, together with one supported by the government, have worked to resolve issues over safety and worker rights, including the closure of some garment factories. However, a fire last week at a garment factory deemed to be on track with remedial action has served to highlight the race against time to make Bangladesh's garment factories safe, and renewed fears for workers' safety.

Bangladesh fire highlights race to make factories safe

Cambodia's apparel industry is the country's largest manufacturing sector, despite being blighted by strikes, wage disputes, and factory faintings. Garment manufacturers have called for a focus on productivity in the sector as a 9.4% rise in the minimum wage for clothing workers to US$140 per month kicked in last month. They are also urging buyers to increase their prices for Cambodian goods. A national campaign to push multinational brands to pay suppliers a minimum wage of $177m – which labour rights groups and unions believe is a fair minimum wage – began in November.

Brands face renewed criticism over Cambodia wages

Year-to-date

While monthly trade data is often volatile, with big swings from one month to the next, a broader view of the year so far shows total US apparel and textile imports grew 7% between January and December to reach 63.52bn SME, up from 59.37bn SME in the prior year. Within this, textiles increased 7.6% to 36.31bn SME, while apparel shipments were up 6.1% to 27.22bn SME. 

In value terms, total US apparel and textile imports were up 4.2% to $111.93bn for the 12 months, from $107.46bn a year earlier. Apparel imports climbed 4.1% to $85.17bn, while textiles rose 4.2% to $26.8bn.

All but one of the top ten apparel supplier countries booked growth. Movement within the top three during the year shows imports from China rose 5.6% to 11.39bn SME in 2015, Vietnam grew 14% to 3.14bn SME, and Bangladesh increased 16.2% to 1.87bn SME.

The other winners included India (up 7% to 1.02bn SME), El Salvador (up 3.1% to 813m SME), Honduras (up 2.7% to 1.11bn SME), Cambodia (up 3% to 1.05bn SME), Indonesia (up 1.4% to 1.26bn SME), and Pakistan (up 0.8% to 591m SME). However, Mexico saw its apparel shipments drop 2% to 898m SME.