Unlike gasoline, housing, food, and auto loans, apparel is a discretionary purchase.
What are consumers and importers doing?
Here are some numbers from OTEXA, the Office of Textiles and Apparel. Glance at the chart (click on it for a sharper image), then follow the discussion below to understand what is happening.
US Apparel Imports by Country
Chart from reader Tim Wallace. It represents about 86% of US apparel imports. Tim writes …
I get data straight from OTEXA, looking at the apparel consolidation line under SME – Square Meter Equivalents – which is volume, not dollars.
Mish note: Dollar amounts are likely a better way of looking at things. From that perspective, global imports look much worse than the above chart implies.
The following synopsis will help clarify things.
- After huge numbers for January and February, with import volume up a total of 12.84% at the start the year, volume is negative year to date. Since March, import volume is down 5.09% globally. China is down 7.57%.
- Global import volumes were down 1.33% in June, 3.51% in July, and 4.26% in August, progressively worsening numbers.
- Year to date, shipping volume is down 1.8% globally and 2.26% in China.
- In dollar terms, global imports are down 4.46% year to date. China is down 7.73% year to date.
- Demand was strong in January and February, but overall demand is very soft.
- The numbers for September will come out on November 4.
Scroll down the column “Change Since March” to see weakening demand volumes.
- By volume, apparel imports are down 1.8% globally, and 2.26% from China
- By price, apparel imports are down 4.46% globally, and 7.73% from China.
- China accounts for 41.52% of volume and 35.1% of price.
Price is weakening much faster than volume.
This data was not impacted by Hanjin. The Hanjin impact starts in September.
Hanjin refers to the bankruptcy of a global shipper, with merchandise unable to dock.
On September 3, Stratfor wrote Hanjin’s bankruptcy reveals much about the world economy
Buffeted by overcapacity in the global shipping market, South Korean giant Hanjin Shipping Co. appears to be sailing toward oblivion. In the past week, creditors pulled the plug after 1 trillion won ($900 million) in support failed to keep the company afloat, forcing Hanjin to file for bankruptcy protection. Seoul Central District Court, which will decide the eventual fate of the company, has set a Nov. 25 deadline for Hanjin to develop another restructuring plan, but many experts think liquidation will be the most likely outcome.
In the short term, the company’s demise has temporarily raised some shipping rates, which have remained persistently low industrywide thanks to the sluggish global economy. It likely will also cause some supply disruptions during the peak season for orders of holiday goods.
But even if the company, the eighth largest by capacity in the world, finds an unlikely way out of its predicament, the underlying problems of overcapacity and sluggish global demand growth will continue to hamper the industry. In addition, the collapse of Hanjin deals another blow to the South Korean economy, which faces stiff competition in the high-tech market from rivals Japan and China.
Once Hanjin filed for receivership, it set off a cascade of effects for its ships already at sea. Nearly a dozen of the ships operated by the company have been seized or detained at international ports in both Singapore and China. Additionally, because each entity along its logistics chain — from tugboats to truckers moving containers — is worried about getting paid, the company’s ships that are already loaded and crossing the ocean will face difficulties as they reach their destinations. Not only have ports denied the vessels access, but they can be seized if they are allowed to dock. Those idle ships would then clog up these ports, which could lead to additional delays. Furthermore, other firms are also refusing to work with Hanjin, in fear that there would be no payment for services. Numerous ships are sitting at anchor, waiting to see how the bankruptcy process plays out.
Christmas Season Hints
As it stands now, it appears retailers expect soft demand this Christmas shopping season, at least for apparel.
Mike “Mish” Shedlock