Exporters have expressed hope that increased business in the USA would make up for any possible export losses in European countries as they are going into an economic recession
Continued growth in exports to the US market is a silver lining for the overall apparel sector of Bangladesh despite the threat of a slump in demand in European countries amid an ongoing recession, exporters have said.
The country’s apparel exports to the USA, its single-largest export destination, grew 48.6% to $8.46 billion year-on-year during the first 10 months of the current year, according to data obtained from the Office of Textiles and Apparel (OTEXA), an affiliate of the US Department of Commerce. The export growth took place both in terms of value and volume during the period.
Exporters have expressed hope that increased business in the USA would make up for any possible export losses in European countries as they are going into an economic recession.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the performance of the country’s apparel sector in the USA was very good considering the current global economic situation.
“Exports to the US market in the first ten months of this year are higher than that of the entire 2021,” he said, adding that Bangladesh’s apparel exports to the US are expected to reach $10 billion at the end of this year, up from $7.14 billion a year ago.
The BGMEA president identified three main reasons behind this growth in exports to the USA – buyers’ confidence in Bangladeshi exporters due to the apparel diplomacy they have been following until now, an increase in unit prices in the wake of raw material price hike, and Bangladeshi apparel makers producing value-added items.
Moreover, Bangladesh’s apparel industry has made big improvements in workplace and other safety standards, he added.
“In spite of the global economic recession, apparel demand has been increasing in the US market. At the same time, the US dollar has become stronger than taka, which also helped to increase their purchase capacity. This is reflected in increases in prices considering unit and square metre value (SMV) and exports of value-added products,” said Faruque Hassan.
Giving an example of value-added products, the BGMEA president said, “We used to export shirts at $12 per unit FOB (free on board) price, but we are exporting the product at $25 FOB price per unit.”
He further explained that the industry got higher prices in exports from March to September, because of a hike in raw material prices.
Sparrow Group Managing Director Shovon Islam said the US market has been growing consistently. The Bangladesh apparel industry has the potential for further growth in business in the market, which will compensate for the possible export losses in European countries this year, he observed.
He also mentioned that sales in the US market were very good during Christmas and Thanksgiving Day.
Due to geo-political reasons, the USA has reduced its import of apparel from China, which has also come as a blessing for Bangladesh.
“We are getting some orders that shifted from China, Sri Lanka, and Myanmar,” said Shovon Islam.
Echoing him, Md Anwar Shahid, vice-president of the Bangladesh Garment Buying House Association, said an increased export to the US market will definitely offset the possible losses in European markets.
He also mentioned that European markets are mainly knit item driven while the US market is driven by woven items.
Shovon Islam also mentioned that the USA also is facing the effect of a global economic recession as interest rates in the country are going high, and energy prices also have gone up. But people are still buying clothes there, he added.
If the US can overcome the impacts of the economic recession, there will be strong demand for apparel there, he mentioned. He, however, expressed his fear that apparel export may go slow in the first half of next year as they have observed a slowdown in orders.
US expected to escape recession in 2023
Goldman Sachs Research, however, finds that the US will probably stick a soft landing next year: the world’s largest economy is forecast to narrowly avoid a recession as inflation fades and unemployment nudges up slightly.
In a report published last month, Goldman Sachs said, “Our economists say there’s a 35% probability that the U.S. tips into recession over the next year, an estimate that’s well below the median of 65% among forecasters in a Wall Street Journal survey. The US may avoid a downturn in part because data on economic activity is nowhere close to recessionary.”
GDP grew 2.6% (annualised) in the third quarter, according to an advance report, the report said, adding that the country added 261,000 jobs in October.
According to CNN Business, the US economy grew much faster than expected in the third quarter, according to the latest gross domestic product report, which showed GDP rose by an annualised rate of 2.9%.
That’s an improvement from the initial government reading in October that showed 2.6% growth in economic activity, and better than the Refinitiv forecast of 2.7%. And it’s a marked turnaround from economic contractions of 1.6% in the first quarter of the year and 0.6% in the second.
The better-than-expected growth came as consumer spending increased more than in the government’s previous reading, while the value of imports was revised down. Imports are subtracted from GDP, which is the broad measure of economic activity within the country.
EU’s gloomy outlook
Meanwhile, the European Commission’s autumn economic forecast mentioned that the Eurozone and most EU countries will head to an economic recession in the last quarter of 2022.
“The economic situation has deteriorated markedly and we are heading into two quarters of contraction,” said EU economy commissioner Paolo Gentiloni at a press conference, according to euronews.com.
The EU’s executive revised up its inflation forecast from July, predicting that prices would peak at year-end and remain high in 2023.
Inflation will average 9.3% in the EU and 8.5% in the eurozone for 2022, Brussels said.
“The EU is among the most exposed advanced economies (to high prices), due to its geographical proximity to the war and heavy reliance on gas imports from Russia,” the European Commission said in a statement.
“The energy crisis is eroding households’ purchasing power and weighing on production.”
US imports in January-October
USA apparel imports reached $87.05 billion in the January-October period of 2022, posting a 30.16% yearly increase.
The imports so far in 2022 have been the best of all time surpassing the previous best figure – $72.52 billion – that was witnessed during the same period in 2019.
Of the top five US sourcing destinations, Bangladesh benefited the most in terms of percentage-wise share (in values) as it grew to 9.71 in January-October 2022 from 8.51% in the same period a year earlier.
Bangladesh shipped $8.46 billion worth of apparel in the US market in the mentioned period, with a 48.56% YOY surge.
The US imported 2.76 billion square metres of apparel from Bangladesh during the period, which was 31.39% higher than 2.10 billion square metres shipped in the corresponding period of 2021.
The overall US import of apparel during the first 10 months of this year from across the world increased 30.16% to $87.09 billion, according to OTEXA data.
China secured its top rank with $19.33 billion worth of garments entering the USA from the Asian giant at a growth rate of 20.76%.
However, the value-wise share has come down to 22.19% from 23.92% a year earlier
Vietnam’s market share too dipped to 18.42% in January-October 2022 from 18.42% in the same period of the prior year. The country still remained at the second position with $16.04 billion apparel export values in the US market.
India and Indonesia are yet again in close contest as India exported $5 billion (up 45%) worth of garments to the USA, while shipment from Indonesia to the USA was valued at $4.95 billion (up 47.57%).