Vietnam led US apparel import growth in July

Vietnam led US apparel import growth in July

US apparel imports in July booked a double-digit increase on the month before as retailers stocked up for the back-to-school season – with the biggest surge being seen by China, by far the largest supplier of apparel to the US.

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 fell 3.5% year-on-year in July – widening a fall of 1.3% seen in June. Imports during the month slipped to 2.54bn square metre equivalents (SME), from 2.63bn SME in the prior year. In value terms, imports were down 8.9% year-on-year to $7.81bn in July.

However, the figures also show July's apparel imports of 2.54bn SME were up 10.4% on the 2.3bn SME booked in June as retailers stocked up for the all-important back-to-school season.

In terms of individual supplier countries, only two of the top-ten recorded year-on-year growth, with Cambodia and Pakistan both recording double-digit declines.

Shipments from China – the largest supplier of apparel to the US – were down 2.2% to 1.17bn SME, but surged 23% compared with a month earlier. 

The second-largest supplier, Vietnam, was one of the two countries to record year-on-year growth, booking an increase of 9.2% to 295m SME, stronger than June's growth of 4.5%. It also saw a 4.9% gain on June. Indonesia, meanwhile, also recorded growth of 3.5% to 115m SME on the year before. 

Bangladesh, ranked number three in the top-ten league table, saw a decline of 3.6% to 166m SME. Pakistan, meanwhile, recorded the largest decline of 17.7% to 45m SME, and Cambodia a decline of 16.8% to 70m SME. 

Of the remaining top-ten supplier countries, India booked a decline of 5.3% to 81m SME, with imports also slipping 1.8% month-on-month. 

Honduras booked a year-on-year decline of 8.5% to 100m SME, and Mexico a 9.5% fall year-on-year to 69m SME. El Salvador, meanwhile, recorded a decline of 4.8% to 83m SME. 

Total US apparel and textile imports in July rose 2.7% from June but were down 4.9% in July, dropping to 5.69bn SME from 5.99bn SME in the same period a year ago, with textiles down 6.1% to 3.15bn SME.

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Facts behind the figures

While there continue to be concerns that increasing wages are undermining the competitiveness of China's garment production on the world stage, the latest figures confirm it still remains the largest source for apparel buyers as rising prices are largely being offset by productivity gains. No other 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. The country also continues to lead the way when it comes to efficiency and infrastructure.

A new Fashion Industry Benchmarking Study published in June found that China's position as the number one sourcing destination seems unlikely to change anytime soon. A further report, by the Footwear Distributors and Retailers of America (FDRA), shows China looks set to remain the powerhouse of global footwear manufacturing and a key supplier to the US, despite Vietnam gaining ground.

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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 conclusion of negotiations on the Trans-Pacific Partnership (TPP) trade agreement means Vietnam is expected to be one of the biggest beneficiaries. Manufacturers in Vietnam also stand to gain from improved access to the EU import market once the EU-Vietnam free trade agreement comes into force.

Vietnam's apparel exports exceeded $27bn in 2015, surpassing a target of $20bn by 2020, and are expected to hit $31m this year. Yet with such a gap between what the industry has achieved and what it targeted, the garment industry is calling on the government to create a development strategy to 2025, with a vision towards 2040, in order to help firms take advantage of opportunities and overcome challenges brought by free trade agreements.

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Despite factory safety concerns, Bangladesh's clothing industry has largely continued to build momentum as a low-cost sourcing destination. 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.

Two recent fatal terrorist attacks in Dhaka left the country's key garment industry in turmoil, with buyers rethinking travel plans and concerns over a potential economic fallout for a sector reliant on foreign investment. 

Industry observers have questioned whether the attacks are a tipping point for Bangladesh, but garment exporters insist that business continues as usual in the country.

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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 $140 per month kicked in at the start of the year. They are also urging buyers to increase their prices for Cambodian goods. Labour rights groups and unions are now pushing for a minimum wage of $177 as talks get underway on setting the 2017 monthly minimum wage for the country's clothing sector. A final decision is expected in October

While Cambodia's garment exports continued to see strong growth during 2015, earning around $6.3bn, this was at a slower rate than the year before, with footwear far outpacing clothing. While the country has retained its B2 credit rating at the same level as last year, an annual update by Moody's Investors Service suggests Cambodia's garment exports and tourism – key drivers of growth – face headwinds from lacklustre global demand.

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Indonesia, which led the field with Vietnam for US import growth in July, has seen its textile and garment industry grow rapidly over recent years, thanks to significant investment in new textile and garment factories. South Korean company PT Nesia Pan Pacific Clothing, to name just one, will invest a total of $60m over three years in new Indonesian factories, according to the government.

And, a new textile training academy in the city of Solo on the Indonesian island of Java is being seen an important step towards addressing the critical shortage of middle managers in the country's garment industry. Courses cover mechanical yarn making, woven cloth making and garment manufacturing engineering.

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Year-to-date and five-year overview

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 declined 1.9% between January and July to reach 35.69bn SME, from 36.37bn SME in the prior year. Within this, textiles dropped 2.9% to 20.57bn SME, while apparel shipments fell 0.5% to 15.13bn SME. 

In value terms, total US apparel and textile imports this year were down 5% to $60.24bn, from $63.39bn in the same period a year ago. Apparel imports fell 3.9% to $45.76bn, while textiles dropped 8.1% to $14.47bn.

However, half of the top ten apparel supplier countries booked growth during the first seven months, with imports from Vietnam increasing 5.6% to 1.90bn SME, Bangladesh up 3.02% to 1.14bn SME, and El Salvador rising 5% to 491m SME.

Taking a broader look at the data, over a five year period from 2010 to 2015, Vietnam is the only country in the top ten to see a steady increase in import volumes to the US, growing from 1.91bn SME in 2010 to 3.13bn SME in 2015, increasing its share from 7.72% to 10.73%. China's imports have fluctuated over this period, from a high of $1.04bn in 2010, falling to $974m a year later, before reaching a peak of $1.14bn in 2015. The country has increased it's share slightly, from 41.98% in 2010 to 42.03% last year. 

Pakistan, meanwhile, is the only country in the top ten to be exporting less to the US than it was five years ago, from $698m to $590m in 2015, lowering its share from 2.82% in 2010 to 2.29% last year. 

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