If no major incident proves as a spoiler this year, projected growth for the international textile and clothing sector should take place, with an expected 3.5% climb in exports to $925 billion, according to a recent report by credit insurer Euler Hermes.
Price increases are returning to the sector because of firmer demand prospects, analysts said. Also, more resilient long-term demand is in the forecast thanks to the growing middle classes in emerging markets. The use of man-made fibers will serve to keep price volatility in check, rather than relying on the more fickle markets for cotton or wool. In 2016, for example, cotton prices rose 5.7% on average as producer prices stagnated in China and decreased 1.8% in India.
Still, this volatility in raw materials, as well as increasing wages for workers, is putting pressure on profitability, Euler Hermes analysts said. Intense competition is another headwind for a sector already impacted by the growing e-commerce sector. Shifting consumer preferences for fast fashion are leading textile and clothing firms to become more flexible in their production.
“A rise in protectionist mood and the termination of Trans-Pacific Partnership trade deal talks could land a blow to the T&C sector,” analysts said. “Tariffs and regulations are already high and pinpointed as impeding sector growth.”
– Nicholas Stern, editorial associate