Who will drive fabric and garment products to grow?

Vietnam’s fabric and garment export value to the U.S. slumped by 25.7% yoy in 6M23 to US$7.04bn.

>> Businesses moan about sharp fall in export orders

VNDirect expects demand for fabric and garment products in the US to bounce back from 1Q24F thanks to better economic conditions. Vietnam’s fabric and garment export value to the U.S. slumped by 25.7% yoy in 6M23 to US$7.04bn. The figure in 2Q23 reached US$3.94bn, 27.2% higher than the previous quarter’s result.

The total fabric and garment imports to the U.S. increased by 12.1% mom in quantity (to 13.2 billion m2) and 9.3% mom in value (to US$9.2 billion) in May 2023. The import quantity has approached the highest level since July 2022, which reflects a progressive improvement in demand for fabric and garment products.

Retail inventories of clothing and accessories have been declining since March but are still at a high level compared with the pre-pandemic period; thus, VNDirect believes that the inventory refilling activities in the next few months will be at a moderate pace. However, it expects the upsurge of demand during the holiday season will help boost sales and absorb the high-level inventory, making room for new orders into the 2024F spring-summer season coming after.

“We see that the US is making progress in controlling inflation as the consumer price index in June 2023 increased by 3.0% from a year ago, the lowest growth level since March 2021. We expect the tightening cycle to be reversed after 2023F, which will help release the burden on consumption of nondurable goods, including clothing and other textile products”, said VNDirect.

>> Opportunities for Vietnam's textile firms

Meanwhile, Vietnam’s fabric and garment export value to the EU in 6M23 decreased by 10.2% year over year to US$1.89bn. In 2Q23, the data was recorded at US$1.12bn, equivalent to an upsurge of 43.8% qoq thanks to the low base in 1Q23 (at US$776.5m, the lowest level since 3Q21).

Vietnam’s fabric and garment export value to the US accelerated 9.5% in June 2023.

However, the financing conditions are expected to tighten further in the following months, which is a risk for the consumption prospects in this market. Core-CPI in the Euro area rose back in June 2023 to 5.4% year over year; the battle against inflation has more to go.

According to EURATEX, the business sentiment in the T&G industry in the EU is deteriorating, suggesting that activities in this sector will contract in the next quarter. The sentiment dropped 0.7 points for textiles and 10.1 points for clothing from May to June, resulting mainly from managers’ more pessimistic views based on their current level of orders and stocks of finished products.