Market Updates – June 2024- Asia’s Fashion Exports Remain Resilient Amidst Economic Changes

The fashion export market in Asia exhibited resilience in May, as major production hubs like Bangladesh, China, India and Vietnam continued to respond to demand from key Western markets. Economic factors impacted the sector, leading to a mixed picture for the near-term prospects of the industry.  

Bangladesh 

Bangladesh’s fashion export industry faces a complex economic landscape. Inflation has risen to 9.89%.  The apparel exports rose up to $43.85 billion from July 2023 to May 2024 with 2.86% increase from last fiscal year. Due to the global inflation and interest rates, May export declined 17.03% compared to that of 2023.    

Logistical challenges compound the situation, with congestion at the Chattogram port doubling container shipping rates to some destinations. The new Patenga Container Terminal, which worths $100 million, aims to alleviate this congestion. Dhaka airport and cargo facilities also face severe congestion due to the Eid holiday surge and ongoing sea port congestion.  

China 

China’s economy is showing signs of stabilization. Consumer spending, industrial output, and retail sales have all increased compared to the previous year despite the drop of foreign direct investment.  Gross imports and exports have expanded by 6.3% in RMB YoY in the first five months of the year.  China’s factory activity slowed in May, but profits for major industrial enterprises rebounded in April, reversing a previous decline.  

In the logistics realm, many US retailers are hoarding inventories due to trade policy uncertainties surrounding the upcoming US elections and expected peak season price hikes. This has boosted maritime shipping demand, but also led to nearly 50% of Asia-Europe sailings experiencing delays due to congestion at Asian ports. Tensions in the Red Sea have forced cargo ships to take longer routes around the Cape of Good Hope, leading to increased shipping costs. Since the global shipping giants have increased their shipping rates, Chinese exporters are proactively altering their shipping strategies and exploring alternative options such as cargo freight and China-Europe Freight Train.   

On the raw materials aspect, cotton and cotton yarn prices have remained stable, but linen fabric prices are expected to rise until the European linen crop season arrives in August.  

India  

India’s fashion and textile exports have shown resilience, with textiles and apparel both seeing significant growth of 9.59% and 9.70% respectively in May 2024, contributing to a total export surge of 10.2% to USD68.29 billion. However, factories are operating at 80-85% capacity due to decreased order volumes and a 25-30% workforce shortfall.  

While Tamil Nadu, India’s principal textile exporting state, saw a slight decline in textile exports to USD 7.1 billion in FY24 compared to that of previous year.  The government has introduced a free training program to upskill unemployed youth in key industry areas. The footwear sector, on the other hand, is experiencing a prolonged business slowdown, affecting vendor productivity and new product development.  

The Indian election results are boosting business sentiments with expectations of labor and business reforms stimulate economic growth and job creation. Garment exporters are also optimistic about a potential Free Trade Agreement with the United Kingdom.  

Vietnam 

Textile and garment exports rose 3.3% to USD 13.11 billion and footwear exports increased 7.1% reaching USD 8.63 billion in the first five months. This growth has been bolstered by the country’s strong compliance with labor and environmental standards, making it an attractive production hub.  

Foreign direct investment in the manufacturing sector also saw a 2% uptick exceeding USD 11.07 billion in the first 5 months.   

The government’s proposal for a new Industrial Park and Economic Zone Law aims to further foster supply chain development and promote green growth. Challenges remain, however, as the Vietnamese trade union has proposed reducing the private sector’s working week.  

These varied economic signals present a complex operating environment for Asian fashion exporters, requiring agility and adaptability to navigate the evolving landscape.  

Supply chain resilience, new markets development, and infrastructure improvements will be crucial strategies to navigate the evolving landscape.   

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