Economic report
Sales (EURO 7.94 BLN) and trade surplus (EURO 2.3 BLN) for Italian textiles are up 1.3% and 0.4%, respectively.
For the second consecutive year, employment holds steady.
China - with Hong Kong - repeats as buyer N.1 of Made-in-Italy fabrics, ahead of Germany.
1. The preliminary balance for 2017
According to SMI estimates based on the reference economic context and on internal Sampling Surveys, Made-in-Italy textiles (including wool, cotton, linen, silk fabrics and knits) are expected to close 2017 with a reversal of the trend.
After two negative years, the sector posted a moderately positive performance - in the range of +1.3% - thanks also to the generally improved economic context. Overall turnover is therefore expected to exceed euro 7.9 billion.
Sales of Italian textiles account for approximately 15% of the total turnover of the Textiles-Fashion supply chain (see Figure 1). Results reflect the recovery on both international and domestic markets, mainly focusing on high-end products often destined for export.
The segment breakdown shows that wool fabrics, linen fabrics and knits are expected to close 2017 with a positive sign. Conversely, cotton fabrics will continue on the negative trend, although at a slower pace and, lastly, silk fabrics are also expected to perform negatively, in line with 2016.
Production value (which projections by SMI calculate separately, considering the value of total sales net of the contribution deriving from the sale of imported products) is characterized by a favorable evolution with a projected +0.7% increase.
As for employment, there was considerable friction during the year. However, the survey analysis carried out by SMI revealed that wool fabric producers included in the panel registered a slight increase in the sector’s headcount in 2017.
In 2017, the performance of trade “from” and “to” Italy seemed to show signs of improvement. In the year, exports increased by +0.8%, bringing the total of international sales above euro 4.3 billion. Concurrently, imports are expected to be positive again with growth at +1.3%, exceeding euro 2 billion.
Given the aforementioned trade performance, the trade balance for the industry is expected to show a slight increase (euro 8.8 million), totaling euro 2,303 million. The surplus in textiles makes for 25.4% of the total sales generated in the Textiles-Fashion segment.
As anticipated, the domestic market (estimated by the ‘apparent consumption’ projections), often represented by luxury brands, posted a positive performance, estimated at +1.0 % on an annual basis. According to ISTAT data, the manufacturing price index on the domestic market recorded a +1.8% increase compared to +0.2% of the international market (data from January-November 2017).
According to ISTAT data on industrial manufacturing (see Figure 2), woven fabrics (knits excluded), after a negative performance recorded in the first quarter of 2015 that continued for the next 7 quarters, including the fourth quarter of 2016, reversed the trend in the first quarter of 2017 with a +2.0% increase. In the second quarter of 2017, woven fabrics posted another negative performance equal to -1.8%, followed by a sharp rise, equal to +4.7%, in the third quarter.
Considering the nine-month span, average growth in manufacturing totaled +1.4% against the same period of the previous year.
The most recent data available, relative to the October-November period, show a +0.9% recovery over the eleven months.
International sales in the first ten months of 2017
The analysis of international sales of knits and woven fabrics composed of mainly natural fibers (see Fig. 3 Note 1) reveals that exports in the January-October 2017 span reversed the trend, showing a slight increase in the range of +0.3%. Exports in this period totaled euro 3,039 million, up euro 9 million compared to the January-October 2016 time span. However, in terms of volumes, this translates into a -3.9% reduction.
Similarly, imports also reversed the negative trend with a feeble +0.2%, for a total of euro 1,395 million.
The geographic breakdown shows that export results differed depending on whether they were destined to EU or extra-EU markets, as indicated in Figure 3: the first, with a 51.1% incidence, dropped -1.1%, while the second grew by +1.8%. Concurrently, imports reveal exactly the opposite performance: the extra-EU markets, making for 66.3% of total imports of fabrics to Italy, dropped by -0.8%, while EU markets posted a +2.2% rise.
In addition to the average figures by macro-area, it is also worthwhile to analyze the individual performances recorded by the countries that are the main commercial partners of Italian mills (see Table 2), which posted peculiar and often diverging trends.
In the first ten months of 2017, the German market, after the marked reduction registered in the previous two-year period, slowed down its fall to -0.5%. Rumania and France, two other important markets, considered “close”, also showed downtrends of -5.8% and -1.6%, respectively.
This critical data is counterbalanced by the progress of China, showing double digit growth equal to +12.4%; exports to China totaled euro 186 million, which, summed up to the euro 125 million of Hong Kong (down -2.9%), make the China-Hong Kong region the top market for Made-in-Italy fabrics, topping Germany (euro 311 million against euro 291 million). More specifically, it should be noted that China first overtook Germany in the month of December 2015 (euro 378 million against euro 364 million), when Germany was still the No.1 market ahead of China&Hong Kong in the first eleven months of 2015.
If we scroll the list of the other top markets for Made-in-Italy textiles, there are also other countries posting positive performances for exports: the United States and Spain show moderate increases, by +6.8% and +7.7%, respectively; on similar levels are also Tunisia and Turkey, the first in line with the value of the past year (+0.1%), while the second posted a +1.3% increase.
Continuing the analysis of the top markets, though with lower absolute values, Portugal and the UK confirmed the values of 2016, targeting +0.2% and -0.1%, respectively. Conversely, Japan registered a -2% reduction, while Bulgaria and Poland grew by +1.1% and +2.2%, respectively. Lastly, South Korea continued to grow, though at a slower pace with +2.6%
Considering the analysis of the markets of origin of textiles imported to Italy, characterized by a high concentration - from a geographic perspective - in the extra-EU regions (66.3%), China and Turkey confirmed their leading and closer position, as it was already observed in the economic notes of the past years, with a share of 24.7% and 20.4%, respectively. It should be noted that in the January-October 2010 span China made for 39.9% of the semi-finished products analyzed in this survey, while Turkey accounted for 12.4%. In the period in question, both markets were characterized by reductions: China by -0.5% and Turkey by -3.1%.
The other main suppliers – even if with an incidence below 10% - recorded growing rates: imports from Pakistan grew by +3.0% and imports from the Czech Republic by +6.1%. Imports from Germany were up +3.8%, followed by Spain (+0.8%), Hungary (+5.7%) and the UK (+12.4%).
As detailed further below, the results on the international markets for textiles do not show the rather divergent performances of the individual categories of fabrics considered (Fig.4). In the January-October 2017 period, knits recovered growth (+2.4%) after a period of reductions.
In the same period, exports of worsted wool fabrics dropped by -4.5%, while combed wool fabrics grew by +5.5%, for a value of well over euro 707 million.
Exports of cotton fabrics, which showed a positive performance in the first half of the year (+1.2%), halted and posted a value of -0.9% over the ten-month period. Exports of linen fabrics dropped by -5.3%.
Similarly to 2016, the worst performance was that of pure silk, which fell sharply (-9.2%); silk fabrics composed of chemical fibers (though included only in the data presented in Table 1) were instead up by +5.5%.
As for imports, in the January-October 2017 period, linen fabrics registered a significant increase (+19.0%). Knits grew by +1.3%.
Imports of cotton fabrics slowed down (-0.3%) along with combed wool fabrics (-0.5%). Imports of worsted wool fabrics and pure silk fabrics showed more negative performances, equal to -8.1% and -6.8%, respectively.
As for the short term prospects analyzed in the survey carried out by SMI last November, all the wool fabric producers selected in the sample expect that the business conditions experienced in 2017 will continue in the upcoming months.
Orders placed for SS2018, though still provisional and incomplete at the moment of the drafting of this note, are positive. In particular, a +5.1% increase is expected for combed fabrics, while double-digit growth is expected for worsted fabrics.
Apart from these still incomplete figures, Milano Unica will serve as a barometer of the market, assessing market conditions and the short-to-medium term outlook for the industry. Thanks to the feedback collected from the main players/buyers in the industry, it will be possible to shape projections on the evolution of Italian textiles in the upcoming months.
Milan, February 6, 2018
