Fashion Economic Trends
2008 actual figures reveal the extent of the crisis which affected the Italian fashion industry and the rest of the Italian economy alike.
The statistical figures for the first quarter of the year indicate extremely bad performance in the first few months of 2009, with double-digit decreases in upstream sectors (net sales down 24% and production down 28%) and a less significant reduction in downstream sectors (net sales down 6% and production down 8%).
Against this background, over the past two months, a new element emerged which actual figures have not yet revealed: a change in expectations is underway, particularly in the distribution sector and, to a lesser extent, in the production sector. Thanks to the early arrival of summer, retail sales for May have exceeded expectations, indicating consumers are willing again to buy.
After the steep fall recorded in the past two quarters, the worst-hit textile industry also shows some signs of stabilisation.
2009 began with a real halt, in the wake of that which marked the last quarter of 2008. Net sales fell significantly: down 12.3% in the first quarter of the year compared with the same period of 2008. This extremely negative performance is mainly due to upstream sectors (down 23.8%), whereas downstream sectors recorded a more modest decrease (down 6.1%).
Italian production was slightly lower than net sales: down 28% and 8.1% for upstream and downstream sectors, respectively. Overall, the Italian fashion industry fell 15.5%.
After the all-time low recorded in the past few months, Italian manufacturing companies’ confidence has shown signs of improvement over the last two months. The confidence indicator is still far from the average figures recorded in 2008 and continues to show a decrease, however, the trend is changing. The same applies to the Eurozone: after recording all-time low figures, the first, modest signs of recovery can be seen, indicating increased confidence. In the US, after posting negative figures for the past 18 months, the index of expected orders is finally above the line separating the contraction from the expansion cycle. Although a mere figure is not indicative of a trend, it helps to look at the next few months with more optimism.
Italian consumers’ confidence has improved in April and May, exceeding 2008 average figures, after hitting 1982 record-low figures at the beginning of the year. Expectations about the Italian economy have improved above all.
Eurozone consumers continue to worry about the economy, although the confidence level has remained unchanged. In the USA, the Consumer Confidence Index improved considerably over the past two months, hitting the highest figures in the last eight months, being those that marked the beginning of the crisis.
In Italy, confidence improved in May, when retail sales recorded an unexpected increase following consumers’ reaction to weather changes and the beginning of the warm season.
In the first quarter of the year, Italian fashion industry exports fell 16% on the same period in 2008. The double-digit decrease was common to all industry sectors. The reduction affected all the main markets in the textile area, while the clothing sector responded well in France and Germany, against a fall recorded by Russia and the USA. The footwear sector grew slightly in France, while it decreased in all the other main markets. France and Italy are the two European countries which show the first signs of a macro-economic recovery.
The slow-down of markets also triggered a reduction in imports (down 7.9% in the fashion industry overall).
The leading indicators of the economic situation reached an all-time low in the first quarter of 2009. However, they have shown more positive figures for some countries over the past two months. Overall, monthly changes are slightly positive for both the OECD area and the Eurozone.
In Europe, France and Italy are among the first countries to show the first signs of recovery. United Kingdom is now slowly stabilising, while Germany, along with other central Europe countries, is still far away from recovery.
The positive figures for Italy and France cover only few months. However, they show that the two countries are quite close to long-term trends, indicating particularly good performance in April.
The OECD’s leading indicators provide a six-month forecast of economic trends. In this case, Italy and France are set to improve significantly already around Christmas’ sales.
The critical elements which had emerged at the end of 2008, developed fully in the first few months of 2009. The second half of the year will be positively affected by the effects of the tax and monetary measures which contributed to stabilising consumers’ and companies’ confidence.
Based on the figures available to date, net sales for the Italian fashion industry for the second half of 2009 are expected to improve, although still negatively with respect to the first half of the year (moreover, forecasts for the second quarter are less dramatic than the actual figures for the first quarter of the year). In addition to this, figures for the end of 2009 will be compared with those for the last quarter of 2008, which recorded an extremely bad performance. These elements enable us to confirm our previous forecast (April) of 2009 closing with net sales decreasing by approximately 6.5%. Although the decrease is greater than that recorded in 2008, it should not be considered irretrievable. With respect to previous forecasts, exports are expected to fall further following the persisting weakness in the European demand, and a less negative trend in consumption.
The downstream and upstream sectors could develop differently, also following their varying degree of sensitivity to the international cycle and the euro/dollar exchange rate trends.
Based on current exchange rates (€ 1 = US$ 1.4), net sales for the upstream sector will continue to deteriorate in the second half of the year, compared with those for the downstream sector. Indeed, the latter sector will benefit from an improved internal demand which is regaining confidence.
