The Problem Of Global Supply And Demand Imbalance Has Been Aggravated Due To Repeated Outbreaks

Since 2022, the global imbalance between supply and demand has intensified due to factors such as the recurrence of a new round of epidemic and the escalation of the situation in Russia and Ukraine. The drastic fluctuation of commodity prices has led to over expected inflation and continued turbulence in the financial market. The continuous accumulation of risk factors at both ends of supply and demand has hindered the prospects of global economic and trade growth. In April, J.P. Morgan's Global Manufacturing Purchasing Managers Index (PMI) was 52.2. Although it was in the expansion range, the output index declined for the first time in 22 months due to factors such as shrinking global export orders and increasing downward pressure on China's economy; The OECD consumer confidence index was 97.3, which was in the contraction range for nine consecutive months. The World Trade Organization (WTO) barometer index of global goods trade in the first quarter was only 98.7, continuing the contraction trend below the trend level since the fourth quarter of 2021. Since March, international commodity prices have risen rapidly, the risk of global economic stagflation has increased, and the inflation rate of major economies such as the United States and the European Union has reached a new high in 40 years.

Figure 1: trends of major global macroeconomic indicators

Data source: IHS Markit, WTO, OECD, national development and Reform Commission Price Monitoring Center

China's macro-economy started smoothly in the first two months under the impetus of the steady growth policy effect. However, since March, the downward pressure on the economy has gradually increased due to the unexpected factors such as frequent outbreaks of domestic epidemic, poor operation of the industrial chain supply chain and weakening market expectations. Statistics show that in the first quarter of 2022, China's GDP increased by 4.8% year-on-year, and its economic growth rate ranked first in the world's major economies. Under the influence of the rebound of the epidemic situation, the production reduction of some enterprises and the continuous decline of market demand, the prosperity level of China's manufacturing industry continued to drop. In April, the purchasing manager's index (PMI) of the manufacturing industry decreased from 49.5 in March to 47.4, which continued to be below the critical point. From January to April, the industrial added value of Enterprises above designated size increased by only 4% year-on-year, and the growth rate dropped by 16.3% compared with the same period of last year, and continued to slow down by 2.5% compared with the first quarter of this year. Compared with the same period of last year, China's total retail investment (including fixed goods) and total exports decreased by 12.5% year-on-year (12.5%) and 12.5% respectively.

Figure 2: year on year growth of China's GDP

Source: National Bureau of statistics

Figure 3: cumulative year-on-year growth rate of China's "troika" index

Source: National Bureau of statistics, China Customs

The textile industry entered a low growth range, and the growth rate of the main economic operation indicators except investment generally fell down compared with the same period of last year. Under the background of the slowdown of macroeconomic growth and the continuous spread of the epidemic situation, the consumption demand of textile and clothing products is relatively low, and the order situation in the "golden three silver four" traditional peak season is weaker than that in the same period and expected in previous years. Under the static management measures of epidemic situation, raw material purchase, finished product delivery and normal production were affected to some extent, resulting in loss of export orders and refund of domestic sales orders. At present, there is a weak trend of weak cash flow and high inventory among the textile enterprises, which is mainly reflected in the weak differentiation between the textile chain and the textile enterprises. China Textile Federation, some professional associations and Jiangsu clothing association carried out key investigation in time. According to the investigation, the key industrial clusters and enterprises in epidemic areas have basically resumed normal production. The resumption of production after May 1 Festival is generally normal. The textile and clothing professional markets have resumed business and resumed business in succession, and most areas have smooth logistics, However, the high transportation costs further increase the pressure on enterprises, and the pressure on the terminal links of the industrial chain is more prominent.

In the second half of the year, the complex situation at home and abroad increased the development pressure of the textile industry, and enterprises generally reduced their development expectations. The gloomy economic prospects, the epidemic situation that has not been effectively controlled, and the continuing geopolitical crisis will reduce the actual purchasing power and consumption intention of residents. The growth of domestic and foreign sales of the textile industry is faced with many restrictive factors, and the weak market demand is difficult to support the industry enterprises to resolve the high pressure of raw materials, transportation and labor costs. Textile enterprises need to actively take advantage of a series of measures to help enterprises and loose monetary policy, continuously promote the transformation and upgrading of products, equipment and technology, tap consumption hotspots, and smoothly ride through the superposition period of supply and demand pressure.