Analysis On The Current Situation Of Textile And Clothing Market Consumption In EU And UK

The EU is one of the important export markets of China's textile industry. The proportion of China's textile and clothing exports to the EU in the total industry exports reached a peak of 21.6% in 2009, surpassing that of the United States. Since then, the EU's share in China's textile and clothing exports has gradually declined, until it was surpassed by ASEAN in 2021, and its share has dropped to 14.4% in 2022. Since 2023, the scale of China's export of textiles and clothing to the EU has continued to decrease. According to China's customs data, China's export of textiles and clothing to the EU from January to April was US $10.7 billion, a year-on-year decrease of 20.5%, and the proportion of exports in the whole industry dropped to 11.5%.

The UK was once an important part of the EU market and will formally complete its Brexit by the end of 2020. After the Brexit of the United Kingdom, the total imports of textiles and clothing from the European Union have shrunk by about 15%. In 2022, China's exports of textiles and clothing to the United Kingdom totaled 7.63 billion dollars. From January to April 2023, China's export of textiles and clothing to the United Kingdom will reach US $1.82 billion, a year-on-year decrease of 13.4%.

Since this year, China's textile industry's exports to the EU and UK markets have declined, which is closely related to its macroeconomic trend and import procurement pattern.

　　 Consumption environment analysis

　　 The currency has raised interest rates several times, exacerbating economic weakness, poor personal income growth and unstable consumption base.

Since 2023, the European Central Bank has raised interest rates three times, and the benchmark interest rate has increased from 3% to 3.75%, significantly higher than the zero interest rate in the middle of 2022; The Bank of England has also raised interest rates twice this year, with the benchmark interest rate rising to 4.5%, both of which have reached the highest level since the international financial crisis in 2008. The rise in interest rates has increased borrowing costs, which has constrained the recovery of investment and consumption, causing economic weakness and slowing personal income growth. In the first quarter of 2023, the GDP of Germany will decline by 0.2% year on year, while that of Britain and France will only increase by 0.2% and 0.9% year on year, respectively, with the growth rate declining by 4.3, 10.4 and 3.6 percentage points year on year. In the first quarter, the disposable income of German households increased by 4.7% year on year, the nominal salary of British employees increased by 5.2% year on year, down 4 and 3.7 percentage points respectively compared with the same period last year, and the real purchasing power of French households decreased by 0.4% month on month. In addition, according to the report of British Asda supermarket chain, 80% of British households' disposable income fell in May, and 40% of British households fell into a negative income situation. The actual income is not enough to pay bills and consume necessities.

Table 1: Adjustment of euro zone benchmark interest rate

Data source: Bank for International Settlements

　　 The overall price is high, and the consumer price of clothing and apparel products rises in shock, weakening the real purchasing power.

Influenced by factors such as excess liquidity and supply shortage, European countries have generally faced serious inflationary pressure since 2022. Although the euro area and the United Kingdom have frequently raised interest rates since 2022 to curb price inflation, the inflation rate of the EU and the United Kingdom has recently fallen from more than 10% of the peak in the second half of 2022 to 7%~9%, But it is still far above the normal inflation level of about 2%. High prices have significantly raised the cost of living and curbed the growth of consumer demand. In the first quarter of 2023, the final consumption of German households will decline by 1% year on year, while the actual consumption expenditure of British households will not increase; The final consumption of French households fell 0.1% month on month, and the number of personal consumption excluding price factors fell 0.6% month on month.

From the perspective of clothing consumption prices, France, Germany and the United Kingdom not only did not gradually fall with the easing of inflation pressure, but also showed a shock upward trend. In the context of poor growth of household income, high prices have an obvious inhibitory effect on clothing consumption. In the first quarter of 2023, the consumption expenditure of German family clothing and shoes increased by 0.9% year on year, while that of French and British family clothing and shoes decreased by 0.4% and 3.8% year on year, respectively, with the growth rate falling by 48.4, 6.2 and 27.4 percentage points year on year. In March 2023, the retail sales of clothing related products in France will decrease by 0.1% year on year, and that in Germany will decrease by 8.7% year on year in April; In the first four months, the retail sales of clothing related products in Britain increased by 13.4% year on year, with a slowdown of 45.3 percentage points compared with the same period of the previous year. If the price increase factor is excluded, the actual retail sales are basically zero growth.

Figure 1: Growth of clothing consumer prices in France, Germany and Britain

Data source: French National Institute of Statistics and Economics, German Federal Bureau of Statistics, British National Bureau of Statistics

Figure 2: Cumulative year-on-year growth of household clothing and shoes consumption in France, Germany and Britain

Data source: French National Institute of Statistics and Economics, German Federal Bureau of Statistics, British National Bureau of Statistics

Figure 3: Retail growth of family clothing, leather shoes and shoes in France, Germany and Britain

Data source: French National Institute of Statistics and Economics, German Federal Bureau of Statistics, British National Bureau of Statistics

　　 Import situation analysis

　　 At present, the import volume of textiles and clothing in EU internal trade has increased, while the import volume from outside has decreased.

The EU textile and clothing product consumption market has a large capacity, and since the EU's independent supply of textiles and clothing is gradually decreasing, imports from outside are an important way for the EU to meet consumer demand. In 1999, the proportion of imports from outside accounted for less than half of the total EU textile and clothing imports, only 41.8%. Since then, it has increased year by year, accounting for more than 50% since 2010, and will fall back to below 50% again by 2021. Since 2016, the EU has imported more than US $100 billion of textiles and clothing from outside every year, and the import amount in 2022 will be US $153.9 billion.

Since 2023, the EU's demand for imported textiles and clothing from outside has declined, while its internal trade has kept growing. In the first quarter, the EU's total imports of textiles and clothing from outside totaled US $33 billion, a year-on-year decrease of 7.9%, and the proportion dropped to 46.8%; The import volume of textiles and clothing in EU internal trade was 37.5 billion US dollars, up 6.9% year on year. By country, in the first quarter, Germany and France's imports of textiles and clothing from within the EU increased by 3.7% and 10.3% respectively year on year, while imports of textiles and clothing from outside the EU decreased by 0.3% and 9.9% respectively year on year.

　　 The decline of British textile and clothing imports from the EU is significantly smaller than that of imports from outside the EU.

Britain's textile and clothing import trade is mainly external to the EU. In 2022, Britain will import 27.61 billion pounds of textiles and clothing, of which only 32% will be imported from the EU, and 68% will be imported from outside the EU, slightly lower than the peak of 70.5% in 2010. From the data, Brexit has no significant impact on the textile and clothing trade between Britain and the EU.

From January to April 2023, Britain imported a total of 7.16 billion pounds of textiles and clothing, of which the amount of textiles and clothing imported from the EU decreased by 4.7% year on year, the amount of textiles and clothing imported from outside the EU decreased by 14.5% year on year, and the proportion of imports from outside the EU also decreased by 3.8 percentage points year on year to 63.5%.

Figure 4: The proportion of textile and clothing imports from outside the EU in the total textile and clothing imports

Source: Eurostat

Figure 5: Growth rate of textile and clothing imports of France, Germany and Britain in the first quarter of 2023

Data source: French National Institute of Statistics and Economics, German Federal Bureau of Statistics, British National Bureau of Statistics

　　 In recent years, China's share in the EU and UK textile and clothing import market has declined year by year.

Before 2020, China's share in the EU textile and clothing import market reached a peak of 42.5% in 2010, and has declined year by year since then, falling to 31.1% in 2019. The outbreak of COVID-19 triggered a rapid growth in the demand for European Union masks, protective clothing and other products. The massive import of epidemic prevention materials lifted China's share in the EU textile and clothing import market to a high of 42.7%. However, since then, with the demand for epidemic prevention materials falling from the peak and the increasingly complex international trade environment, the market share of China's textile and clothing exports in the EU has returned to the downward track, which will be 32.3% in 2022. While China's market share has declined, Bangladesh, India, Pakistan and other three countries in South Asia have increased their market share most significantly. In 2010, the textile and clothing of the three countries in South Asia accounted for only 18.5% of the EU import market, and this proportion will rise to 26.7% in 2022.

Since the so-called "border related act" of the United States came into force, the foreign trade environment of China's textile industry has become more complex and severe. In September 2022, the European Commission adopted the draft of the so-called "forced labor ban", suggesting that the EU take measures to prohibit the use of products manufactured by forced labor in the EU market. Although the EU has not yet announced the progress and effective date of the draft, many purchasers have adjusted and reduced the scale of their own direct imports in order to avoid risks. At the same time, they indirectly urged Chinese textile enterprises to increase overseas production capacity, which has affected the scale of China's direct exports of textiles and clothing.

From January to April 2023, China's market share in the textile and clothing imports from the EU is only 26.9%, down 4.1 percentage points from the same period last year, which has exceeded 2.3 percentage points by the three countries in South Asia. From the perspective of countries, China's share in the textile and clothing import market of France and Germany, the main member countries of the European Union, has declined, and its share in the import market of the United Kingdom has also shown the same trend. From January to April 2023, China's textile and clothing exports accounted for 27.5%, 23.5% and 26.6% of the import markets of France, Germany and Britain, respectively, down 4.6, 4.6 and 4.1 percentage points from the same period last year.

Figure 6: The proportion of China's textile and clothing in the EU import market

Source: Eurostat

Table 2: The proportion of China's textile and clothing in the import market of EU and some countries

Data sources: Eurostat, the French National Institute for Statistics and Economics, the German Federal Bureau of Statistics, and the British National Bureau of Statistics

　　 Tips:

The EU has a population of about 450 million, with a per capita GDP of 38000 US dollars. The annual consumption of personal clothing, shoes and shoes exceeds 360 billion US dollars. It is one of the most important textile and clothing consumption markets in the world. Among them, Germany, France, Spain and the Netherlands are the largest textile and clothing consumption and import markets. The total consumption expenditure of German and French household clothing and shoes accounts for about 40% of the EU. The EU has a certain production and supply capacity of textiles and clothing, but the consumption market capacity is larger. In addition to the internal trade cycle of the EU to meet some demand, it also needs to import about 150 billion dollars of textiles and clothing from outside the EU every year.

The UK will complete its Brexit in 2020. Its consumption capacity of clothing related products is equivalent to that of Germany, and the amount of textile and clothing imported from outside the EU is equivalent to that of France.

(Zhang Qian, China Textile Industry Economic Research Institute)