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Interpretation: Macroeconomic environment of the textile industry in the first to third quarters

Since the beginning of this year, complex factors such as recurring epidemics, protracted geopolitical conflicts, and tightening of the international financial environment have con…

Since the beginning of this year, complex factors such as recurring epidemics, protracted geopolitical conflicts, and tightening of the international financial environment have continued to impact the global economic recovery process. In the third quarter, high inflation across the board and abnormally hot and dry weather in the northern hemisphere have intensified the contradiction between supply and demand, and the slowdown in economic growth has become more obvious. In August, J.P. Morgan’s global manufacturing purchasing managers’ index (PMI) was 50.3, a 26-month low, only slightly above the boom-bust line. Among them, the new orders index was 48.2. Market demand continues to be sluggish, and the global economic recovery momentum is weakening. . The OECD consumer confidence index in July was 96.2, which has been in the contraction range for 12 consecutive months and has been slowing down month by month this year. In the third quarter, the WTO Global Trade in Goods Barometer Index returned to the benchmark level of 100, but was 10 percentage points lower than the same period last year. Global commodity prices have fallen slightly from the high levels in the first quarter, but IMF primary product and energy prices still increased by 38.4% and 90.1% respectively year-on-year in July. Inflationary pressure has not yet eased, with nearly 40% of OECD member countries’ CPI rising by more than 10%.

Figure 1: Trends in major global macroeconomic indicators

Data sources: IHS Markit, WTO, OECD, IMF

Facing the three major expected pressures of demand contraction, supply shock, and weakening expectations, as well as the two major unexpected shocks of the domestic epidemic and the Russia-Ukraine conflict, my country’s GDP achieved a growth of 2.5% in the first half of the year, and the economy has initially formed a rebound momentum after bottoming out. Since July, our country’s economy has overcome the impact of epidemic floods and high temperature weather fluctuations, and the economy has continued to recover, but the foundation for recovery still needs to be consolidated. Statistics show that from January to July, the total retail sales of consumer goods nationwide decreased by 0.2% year-on-year, total exports (in US dollars) increased by 14.6% year-on-year, and the industrial added value of enterprises above designated size increased by 3.5% year-on-year. The growth rate increased by 0.5 and 0.6 respectively compared with the first half of the year. and 0.1 percentage points; total profits during the same period decreased by 1.1% year-on-year, and the growth rate fell by 2.1 percentage points from the first half of the year. Affected by factors such as the frequent outbreaks of the epidemic, the persistence of hot and rainy weather, power rationing and power conservation in Sichuan, Chongqing and the middle and lower reaches of the Yangtze River, my country’s manufacturing PMI in August continued the weak recovery trend since July, although it rebounded by 0.4 percentage points from the previous month. 49.4%, but still in the contraction zone.

Figure 2: my country’s GDP year-on-year growth rate

Data source: National Bureau of Statistics

Figure 3: Cumulative year-on-year growth rate of my country’s “Troika” indicators

Data source: National Bureau of Statistics, China Customs

Since the third quarter, the off-season situation in the textile industry has been obvious, production orders are still insufficient, and the startup rate remains at a low level. The price of finished products fluctuated at a low level after experiencing a rapid decline from mid-June to mid-July. Companies generally destocked at lower prices to reduce inventory. To alleviate financial pressure, profit pressure continues to increase. Under this market situation, the growth rate of industry production and efficiency indicators has slowed down significantly, and the profit decline has continued to expand. Recently, power restriction measures have been gradually lifted in various places. With the peak sales season approaching, the demand for medium-thick fabrics in autumn and winter has just begun to appear. The operating rate of low-count gauze companies for clothing has rebounded slightly. The shipments of some upstream products have accelerated compared with the previous period, and the inventory of finished products has increased slightly. However, the off-season market characterized by sluggish demand and falling prices has not yet ended, and companies have generally lowered their expectations for the peak season.

Looking forward to the fourth quarter, the external environment will become more severe and complex. The shrinking global liquidity will continue to suppress final demand. The adverse effects of inflation and high energy prices in some regions on the consumption of textile and apparel products will further become apparent. The export market faces the risk of volatility. . Domestic sales in the textile industry will recover driven by the autumn and winter consumption seasons. The recovery of domestic demand will be the key to the industry’s bottoming out and the domestic market will become the backbone of stabilizing the development of the textile industry.

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Author: clsrich