Analysis of the pressure of domestic demand and development in the textile and garment industry

In 2012, affected by the economic slowdown, the price level will return to normal. It is expected that the growth rate of the textile and clothing industry will slow down compared to that of 2011, but a slight increase in volume will ensure that the industry can still achieve certain growth rate.

The industry situation in 2012 is not optimistic. The shrinking demand is the main reason that restricts the export performance of China's textile and garment industry. In addition, the price increase effect of products will be further weakened in 2012. It is expected that the growth rate of the industry's exports will continue to fall on the basis of the 2011 high base.

In 2011, benefiting from the price increase driven by raw materials, China's textile and garment export data as a whole was good, showing a situation of “high before and after low”. In 2012, faced with many unfavorable factors such as the economic downturn in foreign countries, the slowdown in the domestic economy, the weakening of cost advantages, and the appreciation of ***, China's textile and garment processing and manufacturing enterprises will undergo a reshuffle process to accelerate the pace of industrial upgrading to adapt to the operating environment. change.

Export growth continues to fall

The European debt crisis and the fall in the cotton price have led to the reduction of corporate orders, coupled with the existence of two major uncertainties, such as foreign demand and lower cotton prices. In 2012, the performance of exporting manufacturing companies will be negatively affected.

In fact, both the value of textile and apparel exports and domestic retail sales maintained a relatively high growth in 2011, but the performance of the industry showed a “high-to-low” attitude. In this case, there are two major factors that affect the performance of textile export manufacturing companies, namely the shrinking of foreign demand and the fall in cotton prices. Due to the large drop in the price of cotton, since the second half of 2011, textile and garment export companies have not received orders for optimism and their inventory has increased. The fall in cotton prices has led to a drop in product prices. At the same time, companies need time to absorb the high-priced cotton purchased in the previous period, which has a certain impact on gross margins.

The major international economies have experienced weak recovery since April 2011. Among them, with the exception of Japan's post-disaster internal demand, the U.S. economic activity was weaker than expected, and the actual purchasing power of residents was weak. The further spread of the European sovereign debt crisis made 2012 still not optimistic. The shrinking of demand is the main reason constraining the export performance of China's textile and garment industry. In addition, the price increase effect of products will be further weakened next year. It is expected that the growth rate of the industry's exports in 2012 will continue to fall on the basis of the high base in 2011.

Domestic demand is relatively stable

From the aspect of domestic demand, from January to October 2011, total retail sales of social consumer goods in China increased by 17% year-on-year, and the growth rate of apparel consumption in 100 large-scale shopping malls was 24.1%. In October, the monthly growth rate dropped significantly. In November, affected by the warm weather, clothing retail sales were weak, but the weather turned cold in December. Affected by the Spring Festival advance sales, retail terminal growth recovered faster.

Although the overall retail sales of apparel and home textiles maintained a steady growth, the growth mode in 2011 mainly came from rising commodity prices, rather than a significant increase in sales. In 2011, the retail price of clothing was higher, and the sales volume of shopping malls did not increase significantly. The increase in total sales driven by price increases may have a deterrent effect on sales volume. As a result, retail sales growth slowed down in the second half of the year.

In the long run, the market space for apparel home textiles is still large, but due to the relatively stable terminal demand, the market will not rise significantly.

Although the domestic demand market will be relatively stable, companies still need to be cautious about channel inventory issues. In addition, the funds of private enterprises in 2011 were very tight, and the problem of enterprise inventory was more obvious. In particular, the decrease in cotton prices led to the reduction of orders, which led to rising inventory levels. Whether it is export or domestic sales companies, there have been problems such as increased inventory, increased accounts receivable, and poor cash flow. It is expected that this situation will still be difficult to improve in the short term.

Apparel consumption will slow

In 2011, benefiting from high inflation, under the background of rising manufacturing costs, China's textile and apparel companies passed cost-raising mechanisms well and passed cost pressures downstream. From January to September, total retail sales of clothing, shoes, hats, and needle textiles were realized. Nearly 25% of the high growth, a single month in September hit a record high for the year, retail sales growth reached 27.60%. However, under the influence of warm winter weather and economic factors, overall sales in October and November have declined slightly from the growth rate in the previous three quarters. In the month of November, the retail sales of the industry increased by 22.5%, which was a 3.0 percentage point increase from the sales growth in October. This is mainly due to the lowest base figure in November last year. At the end of the year, Christmas or other vacations may have caused some recovery.

Downward inflation may ease the derogation of clothing consumption prices. Up until October, the continued increase in prices was the main driving force behind the sustained increase in retail sales. However, from the point of view of the sales volume of clothing, there was a serious divergence, and some of the categories of clothing even fell negatively. Take the sales data of key retailers in the country as an example. Since the high retail price in April 2011, the price decline has become more apparent. As of the end of October, the scissor spread between volume and price has increased from 9.20 percentage points at the end of the first quarter to 23.87 percentage points. However, with the gradual release of inflationary pressures and the factors of discounts, the clothing and clothing consumer price index in November also showed a turning point, falling slightly, and the decline in sales volume has also been correspondingly narrowed.

As the price of cotton gradually returns to normal prices, the decline in production costs of enterprises will adjust the ex-factory prices of products, especially the price fluctuations of textiles at the front end of the industrial chain. The ex-factory price index has been declining for seven months in a row. The monthly price fell 4.94% month-on-month. Although price transmission has a process in the industry chain, the ex-factory price index for apparel, shoes, hats and other products as well as the terminal retail price index for all categories are still relatively stable, but pressure has already emerged.

It is expected that the industry's price level will return to normal levels in 2012. For companies with price increases, the price increase will slow down, and for brands that are not competitive and have a lower market position, there may be a certain price drop.