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Industry Analysis: A Three Minute Guide To The Macro Economic Environment Of Textile Industry

2022/2/23 17:54:00 0

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Macro Economy

In 2021, with the help of vaccination and loose monetary policies, the global economy will achieve a bottom recovery. However, affected by the continuous evolution of the epidemic situation and the dislocation of market supply and demand cycle, the global economic recovery presents the characteristics of "weak start in the first quarter, strong recovery in the second quarter, a sharp drop in the third quarter, and a slight recovery in the fourth quarter". According to the IMF's forecast, the global GDP will grow by 5.9% in the whole year, with an average growth rate of only 1.3% in two years. Towards the end of the year, the inflationary pressure started in the United States has been spreading to the world, and the weak demand situation is difficult to improve under the repeated impact of the epidemic situation, which has produced the effect of lowering the development expectation in 2022. In December 2021, J.P. Morgan's Global Manufacturing Purchasing Managers Index (PMI) was 54.2, which has been adjusted around 54 since August when it fell from a high level; In January 2022, the index dropped to 53.2, a 15 month low. The decline in the new order index exceeded the output index, indicating that the contraction trend of the demand side was more obvious than that of the production side. In December 2021, the OECD leading index was 100.520, which was maintained in January 22, but the consumer confidence index continued to drop from 99.5 to 99.1, which was in the contraction range for eight consecutive months. The recovery rhythm of global commodity trade is affected by supply side risk factors such as rebound of epidemic situation, poor logistics and shortage of key materials. In the fourth quarter of 2021, the world trade index of goods entered a contraction trend below the trend level. Commodity prices continued to be in the upward range. In 2021, the IMF commodity price index reached 162.3, up 53.3% from 2020.

Figure 1: global supply and demand side of the main macro indicators change trend

Source: IHS Markit, WTO, OECD

In 2021, China's macro-economy will continue to recover and develop in spite of multiple pressures, such as the spread of domestic epidemic situation and the complex supply and demand situation in the international market. Statistics show that China's gross domestic product (GDP) will reach 114.4 trillion yuan in 2021, with a year-on-year growth of 8.1%. Taking 2019 as the base period (the same below), the average growth rate in two years is 5.1%; China's total retail sales of consumer goods, total exports (US dollar value) and investment in fixed assets (excluding farmers) increased by 12.5%, 29.9% and 4.9% respectively on a year-on-year basis, with an average growth of 3.9%, 16% and 3.9% in two years. Among them, although the average growth rate of total retail sales of social consumer goods in two years has not recovered to the level before the epidemic, the contribution rate of final consumption expenditure to GDP growth reached 65.4%, ranking first among the "troika", indicating that the main role of the domestic big cycle is gradually strengthening. In the case of poor operation of international supply chain, the systematic advantages of China's manufacturing industry have been fully demonstrated. The total export of goods trade has achieved rapid growth, and the contribution rate of net export to GDP growth has reached 20.9%, which is significantly higher than the level before the epidemic. In the whole year, the industrial added value and total profit of Enterprises above designated size increased by 9.6% and 34.3% respectively on a year-on-year basis, with an average growth of 5.8% and 18.2% in the two years, indicating that the production and operation of industrial enterprises are in a steady state of improvement.

chart 2: Year on year growth of China's GDP

Source: National Bureau of statistics

chart 3: China Cumulative year on year growth rate of "troika" index

Source: National Bureau of statistics, China Customs

Looking forward to 2022, the global economy is expected to continue to run on the track of recovery. China's seven major policy arrangements of "taking the lead in stability and seeking progress in stability" provide guarantee for the national economy to achieve the goal of "stable growth". However, the overall external situation faced by the development of the textile industry is still more severe than that in 2021. The evolution of the epidemic situation will still be the key factor affecting the operation trend of the industry. At the same time, inflation has become a global challenge. As a response, monetary policies of all countries tend to tighten, making the prospects of global economic recovery more uncertain. In this context, unstable income expectations, rising prices weaken real purchasing power, and enhanced savings motivation will lead to weaker market demand recovery. The weak market recovery situation, combined with factors such as high commodity prices and difficulty in fully recovering the international supply chain system, will make the macroeconomic situation in 2022 more complex, and the recovery differentiation characteristics among different types of economic entities and different links of the industrial chain will be more obvious.

Thanks to the advantages of the industrial system and the overall improvement of the demand situation, in 2021, China's textile industry made great efforts to overcome the risk impact of epidemic spread, rising raw material prices and poor international transport capacity. The economic operation showed a stable recovery trend, and the main operating indicators rebounded and rebounded. The gap in production, sales and efficiency caused by the epidemic situation was made up, and the export scale reached a new record, However, due to the weakening of the base effect, the whole year's operation shows a trend of "high before and low after". In 2022, textile enterprises have returned to work normally after the Spring Festival. Although a large number of spring and summer orders have not yet been issued, the enterprises' feedback on the purchase and sales situation is better than that expected before the festival. At the same time, the enthusiasm of enterprises in the middle and lower reaches of the industrial chain is weaker than that of the upstream enterprises, reflecting the relatively weak market demand to a certain extent. It is expected that with the elimination of the low base factor caused by the epidemic situation, the economic operation of textile industry will return to the normal recovery track from the recovery growth stage in 2021, and the main economic indicators will enter the low and medium growth range.