Industry Data: China'S Apparel Industry Economic Operation Briefing From January To September

In the first three quarters of 2023, facing the complicated development situation at home and abroad and the impact of multiple unexpected factors, the economic operation of the clothing industry continued to recover. Although the negative growth trend of production, export, efficiency, investment and other major operating indicators has not been reversed, the decline gradually narrowed, and the domestic market continued to recover under the influence of the improvement of residents' income and consumer confidence. Looking forward to the fourth quarter, various uncertainties still exist. The expected decline of global macro-economy, sluggish demand in the international market, and intensified geopolitical conflicts will pose serious challenges to China's clothing exports. However, as China's economy continues to recover and improve, the macro policy of "stabilizing growth and promoting consumption" continues to advance, and the arrival of traditional consumption peak seasons such as "Double Eleventh" and "Double Ninth Festival", it will provide strong support for the stable and good development of China's clothing industry.

　　 1、 Economic operation of clothing industry

　　 （1） The decline of production has slowed down

In the first three quarters, the industrial added value and clothing output of enterprises above designated size in China's clothing industry still showed a negative growth due to the adverse factors such as sluggish market demand, declining export volume, and accelerated order outflow. However, with the steady recovery of the domestic demand market and the strong support of a series of national policies to stabilize growth and employment, industrial production shows marginal improvement characteristics. According to the data of the National Bureau of Statistics, from January to September, the industrial added value of enterprises above designated size in the clothing industry decreased by 8.8% year on year, with an increase rate of 10.8 percentage points lower than that of the same period in 2022, 0.6 percentage points deeper than that of January to June. In July, August and September, the industrial added value of enterprises above designated size in the clothing industry decreased by 11.1%, 10.3% and 8.1% year on year, respectively, and the decline narrowed month by month. From January to September, enterprises above designated size completed 14.509 billion pieces of clothing production, down 9.39% year on year, 7.73 percentage points more than that of the same period in 2022, and 1.55 percentage points more than that of January to June (see Figure 1). From the perspective of category breakdown, the output of woven clothing of enterprises above designated size in the clothing industry was 4.881 billion, down 15.46% year on year, 12.97 percentage points deeper than that of the same period in 2022, and 5.54 percentage points deeper than that of January June; Among them, the output of down clothing and suit decreased by 27.81% and 5.70% respectively year on year, 32.05 and 14.37 percentage points lower than that of the same period in 2022, 0.95 and 2.53 percentage points lower than that of January June respectively; The shirt production decreased by 9.19% year on year, 8.80 percentage points more than that in the same period of 2022, and 0.46 percentage points more than that in January June; The output of knitted clothing was 9.627 billion pieces, a year-on-year decrease of 5.97%, 4.82 percentage points deeper than that of the same period in 2022, and 0.68 percentage points narrower than that of January June.

Figure 1 Production Growth of Clothing Industry from January to September 2023

Data source: National Bureau of Statistics

　　 （2） The domestic market stabilized and recovered

In the first three quarters, the domestic clothing sales market maintained a good recovery trend, the market vitality continued to rise, and consumer demand was gradually released under the influence of positive factors such as the continuous effectiveness of the national consumption promotion policies, the comprehensive recovery of the consumption scene, and the gradual recovery of residents' income and consumer confidence. According to the data of the National Bureau of Statistics, from January to September, China's total retail sales of consumer goods reached 34210.7 billion yuan, up 6.8% year on year, 1.4 percentage points slower than that from January to June. Among them, the retail sales of clothing commodities of units above the designated size totaled 725.7 billion yuan, up 12.8% year on year, 2.7 percentage points slower than that from January to June. In the third quarter, the monthly growth rate of retail sales of clothing products of units above designated size continued to rise, with a year-on-year growth of 2.6% in July, 5.7% in August and 12% in September (see Figure 2). The growth rate of online clothing retail slowed slightly. From January to September, the online retail sales of clothing products increased 9.6% year on year, 3.7 percentage points slower than that from January to June.

Figure 2 Clothing sales in the domestic market from January to September 2023

Data source: National Bureau of Statistics

　　 （3） Increased downward pressure at the outlet

Since this year, under the general environment of sluggish world economic recovery, the pressure on China's clothing export has increased significantly due to the adjustment of the global supply chain, sluggish demand in major international consumer markets, geopolitical risks and other factors. According to Chinese customs data, from January to September, China's exports of clothing and clothing accessories totaled US $121.23 billion, down 8.8% year on year, 18.2 percentage points lower than that of the same period in 2022, and 2.9 percentage points deeper than that of January to June; In the third quarter, the monthly export decline narrowed month by month, and the export decline in July, August and September was 18.0%, 11.9% and 7.9% respectively. From the perspective of volume price relationship, the volume and price of clothing exports fell together. From January to September, the export volume of clothing was 22.93 billion pieces, down 3.8% year on year, and the average export unit price was 4.37 dollars/piece, down 5.3% year on year. Among them, the export volume of knitted clothing decreased by 3.9% year on year, and the export unit price decreased by 6.3% year on year; The export volume of woven clothing decreased by 3.5% year on year, and the export unit price decreased by 4.4% year on year (see Figure 3).

Figure 3 Exports of clothing and clothing accessories from January to September 2023

Data source: China Customs

From the perspective of export categories, from January to September, the export of commuting and social clothing such as suits and casual clothes with high added value and sports clothing such as skiing continued to grow, of which the export amount of suits and casual clothes increased by 14.4% and 27.5% respectively year on year, and the export amount of sports clothing such as skiing increased by 4.3% year on year. In addition, the export value of cold proof clothing such as overcoats and down jackets and household clothing such as pajamas fell 17.8% and 9.9% year on year respectively; The export value of knitted T-shirts and sweaters decreased by 4.6% and 12.8% respectively year on year. Under the influence of the "Xinjiang related Act", China's cotton clothing exports to the United States and other major markets showed a double-digit sharp decline. From January to September, China's export of cotton clothing reached 38.24 billion US dollars, down 12.4% year on year; Among them, the export of cotton knitted clothing was 21.52 billion US dollars, down 18.1% year on year; The export of cotton tatting clothing reached US $16.21 billion, down 9.4% year on year. In addition, China's export of cotton garments to the United States reached US $6.4 billion, down 23.8% year on year; Exports of cotton garments to the EU reached US $5 billion, down 27.1% year on year.

From the perspective of major markets, from January to September, China's clothing exports to the three traditional markets of the United States, the European Union and Japan continued to decline, while its exports to Russia, Africa and countries and regions along the Belt and Road maintained rapid growth. According to Chinese customs data, from January to September, China's clothing exports to the three traditional markets of the United States, the European Union and Japan totaled US $56.6 billion, down 17.2% year on year, accounting for 46.7% of China's total clothing exports, 4.8 percentage points less than the same period in 2022. Among them, China's clothing exports to the United States dropped 15.5% year on year, 13.3 percentage points deeper than that of 2022; Clothing exports to the EU fell by 21.9% year on year, with an increase rate of 24.9 percentage points lower than that of 2022; Clothing exports to Japan fell by 10.8% year on year, 10.5 percentage points deeper than that in 2022. Over the same period, China's clothing exports to emerging markets such as ASEAN, countries and regions along the Belt and Road increased by 3.1% year on year, driving the growth of clothing exports by 1.6 percentage points. Among them, China's clothing exports to ASEAN amounted to US $11.35 billion, up 3% year on year, driving the growth of China's clothing exports by 0.2 percentage points; Clothing exports to Africa and countries and regions along the Belt and Road increased by 17.6% and 4.5% year on year, respectively, driving the growth of China's clothing exports by 0.8 and 1.1 percentage points; However, clothing exports to Latin America and Oceania declined by 6.6% and 6.7% year on year. In addition, China's clothing exports to Russia increased by 21.4% year on year, while those to Britain, Chile and Canada decreased by 20.3%, 24% and 22.8% year on year respectively.

From the perspective of export provinces, the eastern region is still the main concentration of China's clothing exports, while the clothing exports of the central and western regions increased slightly. According to Chinese customs data, from January to September, Zhejiang, Guangdong, Jiangsu, Shandong and Fujian, China's top five garment export provinces, accounted for 69.8% of the total garment export, 1.2 percentage points lower than the same period in 2022, and 0.5 percentage points higher than that from January to June. Among them, Zhejiang clothing exports fell 2.2% year on year, accounting for 1.5 percentage points higher in the proportion of national clothing exports. The clothing exports of Guangdong, Jiangsu and Fujian decreased by 14.8%, 18.8% and 16.4% year on year respectively, accounting for 1.1, 1.6 and 0.8 percentage points of the national clothing exports. Shandong clothing exports fell 2.7% year on year, accounting for 0.7 percentage points higher in the proportion of national clothing exports. Over the same period, the total amount of clothing exports in the central and western regions increased by 0.6% year on year, accounting for 20.6% of the total national clothing exports, 1.9 percentage points higher than the same period in 2022. In addition, the clothing export situation in the central and western provinces is obviously differentiated. The clothing exports of Tibet, Heilongjiang and Gansu have grown rapidly, with growth rates of 135.7%, 129.3% and 105%, while the clothing exports of Anhui, Jiangxi and Hunan have declined by 10.0%, 27.4% and 28.3% respectively.

　　 （4） Enterprise benefits are under serious pressure

In the first three quarters, affected by the interweaving and overlapping of business pressures such as insufficient orders and high costs, the shrinking trend of China's clothing industry's operating revenue and total profits continued, the efficiency of enterprise operations slowed down, the difficulty of profitability increased, the industry's economic operation was under serious pressure, and the main benefit indicators continued to decline compared with the first half of the year. According to the data of the National Bureau of Statistics, from January to September, there were 13575 enterprises above the designated size (annual main business income of 20 million yuan and above) in the clothing industry of China, achieving an operating income of 877.874 billion yuan, a year-on-year decrease of 8.13%, 0.03 percentage points deeper than that from January to June; The total profit was 38.42 billion yuan, down 7.2% year on year, 4.09 percentage points deeper than that from January to June (see Figure 4).

The cost increases, making it more difficult for enterprises to make profits. The loss of enterprises above industry scale reached 26.76%, 8.87 percentage points higher than that of the same period in 2022; The operating profit margin was 4.38%, 0.04 percentage points higher than that of the same period in 2022, and 0.02 percentage points higher than that of January June.

The operating efficiency has declined. The turnover rate of finished products, accounts receivable and total assets were 8.67 times/year, 5.38 times/year and 1.22 times/year respectively, down 0.75%, 0.43% and 0.09% year on year.

Figure 4 Main benefit indicators of the clothing industry from January to September 2023

Data source: National Bureau of Statistics

　　 （5） Investment confidence is still insufficient

In the first three quarters, against the background of weak market demand and declining corporate efficiency, the investment scale of China's clothing industry showed a slight decline, and the investment confidence was still insufficient. According to the data of the National Bureau of Statistics, from January to September, the completed investment in fixed assets of China's clothing industry decreased by 4.7% year on year, with an increase rate of 35.5 percentage points lower than that of the same period in 2022, 0.6 percentage points lower than that of January to June, and 2.5 and 10.9 percentage points lower than the overall level of the textile and manufacturing industries (see Figure 5).

Figure 5 Growth rate of fixed asset investment in clothing industry from January to September 2023

Data source: National Bureau of Statistics

　　 2、 Main influencing factors of clothing industry operation

1. The domestic macro-economy is steadily improving, and the vitality of the domestic market continues to emerge

Since 2023, a series of national policies to expand domestic demand, boost confidence and prevent risks have continued to work effectively, the consumption scene has been fully restored, the income and consumption confidence of residents have gradually recovered, driving the domestic market vitality of the clothing industry to continue to emerge, and maintain a rapid growth momentum. According to the data of the National Bureau of Statistics, the average urban survey unemployment rate in the third quarter was 5.2%, and the average urban survey unemployment rate in 31 major cities was 5.3%, 0.2 and 0.3 percentage points lower than the same period in 2022 respectively; In September, the consumer confidence index was 87.2, up 0.93% from June. In the first three quarters, the per capita disposable income and per capita consumption expenditure of China's residents increased by 5.9% and 8.8% respectively year on year, 2.7 and 7.3 percentage points faster than the same period in 2022; The per capita expenditure on clothing consumption was 1055 yuan, up 6.5% year on year, 7.9 percentage points higher than the same period in 2022. Among them, the per capita clothing consumption expenditure of urban residents increased by 6.4% year on year, while that of rural residents increased by 5.1% year on year, 9.7 and 1.6 percentage points higher than that of the same period in 2022 respectively.

　 2. The weakening trend of international market demand is obvious

Under the situation of complicated evolution of the world political situation, increased risk of global economic recession and other constraints, the prospect of international market recovery is unclear, consumer confidence in major markets in Europe and the United States and other developed countries has declined, clothing retailers are facing high inventory pressure, and the weakening trend of market demand has significantly increased, bringing greater uncertainty to China's clothing exports. Imports from major international markets continued to decline. From January to August, clothing imports from the United States fell by 24.1% year on year, while those from the European Union and Japan fell by 11.3% and 2.8% year on year, respectively. In September, the retail sales of clothing stores in the United States reached US $26.02 billion, down 0.8% from the previous month, the first decline in six months and an increase of 0.1% over the same period last year. The inventory/sales ratio of clothing stores continued to rise, rising to 2.35 in August. In August, retail sales in the euro area fell 1.2% month on month, including online retail sales, which fell 4.5%. High inflation is still inhibiting consumer purchasing power. Japan's domestic consumption growth is sluggish. Due to the continuous inflation, the real income of wage earners declined. After deducting the impact of price factors, Japan's real household consumption fell for six consecutive months year-on-year in August; From January to August, Japan's textile and clothing retail sales totaled 5.5 trillion yen, up 0.9% year on year, 22.8% lower than the same period before the epidemic. Due to the abnormal warm weather, consumers' desire to buy autumn clothes is not high. The UK retail sales fell more than expected in September, and the overall consumer price inflation rate was 6.7%, the highest among major developed economies.

　 3、 Research and judgment on the development trend of clothing industry in the fourth quarter

From the domestic perspective, China's GDP grew 1.3% month on month in the third quarter, and the month on month growth rate increased for five consecutive quarters. The economy as a whole continued to recover. Economic growth has led to the expansion of employment and the increase of residents' income. Residents' consumption ability and willingness have been constantly strengthened, and consumption demand has been released at an accelerated pace. According to the data of the National Bureau of Statistics, the PMI (Purchasing Manager Index) of the manufacturing industry in September was 50.2%, 2.1 percentage points higher than that of the previous month, rising for four consecutive months. Among them, the production index and new order index were 52.7% and 50.5% respectively, up 0.8 and 0.3 percentage points over the previous month, indicating that manufacturing enterprises continued to accelerate their production and business activities, procurement activities were further active, and market demand was released quickly. With the continuous improvement of the national economy and the stimulation of consumer demand from various discount promotions launched by major clothing brands in the traditional peak consumption season in the fourth quarter, the domestic clothing market is expected to continue to recover.

Internationally, the risk of global economic recession continues to rise, and future uncertainty is weakening global consumption capacity and confidence. Recently, the International Monetary Fund predicted that the global economic growth would slow down from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024, lower than the historical average of 3.8%. The WTO predicts that the volume of global commodity trade will increase by 0.8% this year, less than half of the forecast in April, and global trade will continue to be sluggish. In the fourth quarter, driven by major festivals such as Christmas and New Year's Day, the market demand of European and American countries will still be resilient. The backflow of some orders caused by the factory closure due to the strike of Vietnamese and Bangladeshi workers, as well as the devaluation of RMB and other factors will benefit clothing exports in the short term. However, in the long run, various unstable factors still exist. The macro-economy of major developed economies is sluggish, the growth of residents' income is slowing down, the consumption demand in the international market continues to weaken, and the trend of anti globalization has not yet subsided, the growing geographical economic fragmentation and other factors influence China's clothing exports.

In general, in the face of complex and severe domestic and international development situations, garment enterprises should strengthen their confidence, make progress while maintaining stability, continue to promote digital and intelligent transformation and upgrading, optimize product structure, improve market competitiveness of enterprises, while focusing on diversified development, accelerate the adjustment of overseas layout, and lay a solid foundation for stable recovery and high-quality development of the industry.