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RMG export rebounding strongly with revival of European and US economies

The local suppliers are overbooked with work orders from international retailers and brands

Bangladeshi garment factories are now overbooked with the inflow of work orders from the international clothing retailers and brands with the reopening of their stores in the European and the American markets after the severe fallouts of the COVID-19.

The local garment suppliers have already received more than 25 percent work orders for the next season (between November and March) than the last season (between May and August).

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Figure: Bangladeshi garment factories are now overbooked with work orders from international clothing retailers and brands from the European and American markets. Courtesy: Collected

Bangladesh’s main two markets are the European and American ones. Of the total garment export from the country in a year, some 64 percent is sent to the European markets and some 23 percent is sent to the USA markets.

Both the markets have been showing a very positive trend in the way of recovery from the fallouts of COVID-19.

The National Retail Federation (NRF), the retailers’ platform for the American retail businesses also showed some positive trends for the USA markets.

For instance the NRF this week said despite falling consumer confidence numbers amid the recent rise in COVID-19 infections, shoppers are continuing to spend, National Retail Federation Chief Economist Jack Kleinhenz said.

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“With consumer spending accounting for roughly two-thirds of U.S. gross domestic product, all eyes are closely watching shoppers’ ability to drive the economy,” quoted NRF as Kleinhenz was saying.

“If consumer finances are any indication, there is reason to be optimistic: Households remain in good shape, with consumers in the aggregate underspending relative to current income. Even though enhanced unemployment benefits have expired and are no longer providing a boost to personal income, the loss is easily offset by the savings stockpiled since the coronavirus pandemic began,” the NRF also said.

NRF also said consumers’ mid-summer savings rate of 9.6 percent rate was noticeably above pre-pandemic levels and that income growth going forward should benefit from expected strong employment gains and higher wages while Child Tax Credit checks being issued through December will also provide a bump.

In mid-September, the Fed lowered its forecast for gross domestic product growth for the year to 5.9 percent from 7 percent, and the agency expects unemployment to end the year at 4.8 percent rather than 4.4 percent.

Inflation, as measured by the Consumer Price Index, was up 5.2 percent year-over-year in August, fueled by consumer demand and supply chain disruptions, and a Fed survey found consumers expect an equal amount of growth over the next 12 months.

Amid those numbers, the University of Michigan Index of Consumer Sentiment fell to 71 in September, far below its pandemic high of 88.3 in April and the lowest confidence level since the beginning of the pandemic.

Despite all that, August retail sales as calculated by NRF rose sharply, up 2.3 percent month-over-month and 12 percent year-over-year. That brought the first eight months of the year to a 15 percent year-over-year gain and on track to meet NRF’s forecast between 10.5 and 13.5 percent growth for the full year.

“That strong momentum shows there’s a big disconnect between consumer confidence and consumer spending at the moment and that the downdraft in confidence may well be a false scent,” the NRF quoted Kleinhenz.

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“There’s a saying that you should never underestimate the American consumer – and its corollary is that you should watch what consumers do, not what they say.

Over the next several months, the labor market is expected to play an increasing role in the economic outlook.

While August job gains were lower than expected, the upside surprise was that wage growth had accelerated to 4.3 percent year-over-year, and job openings were at a record high of 10.9 million at the end of July.

“That is a clear indication that demand for labor is still strong and that a lack of available workers – not a lack of jobs – remains the major hurdle to robust hiring,” Kleinhenz said.

“With the end of supplemental unemployment benefits taking away financial incentives to stay home and the reopening of schools easing child care responsibilities for parents who want to get back to work, stronger growth should be on its way,” according to Kleinhenz in the NRF.

Similarly, Eurostat has also been showing some positive signs of recovery of the European markets.

In July 2021, total EU retail sales decreased by 1.9 percent compared with June 2021; in the euro area, the decrease was 2.3 percent.

The total sales volume in the EU is now 3.1 percent higher than in February 2020 before the Covid-19 crisis (2.6 percent higher in the euro area), according to Eurostat last week.

Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has also hinted at a massive positive recovery of garment export with the reopening of the stores in the western world from the severe fallouts of COVID-19.

“We have been receiving a lot of work orders from the international retailers and brands now. We are very hopeful about a strong recovery of our business,” Hassan said at a meet the press program at The Westin Hotel in Dhaka Saturday.

Hassan also said the US retailers have assured him that they will continue sourcing from the country as he held several meetings with the American stakeholders in the clothing industry in his visit to the USA and Canada last month.

The BGMEA chief also said the international retailers and brands have been coming to Bangladesh with an increased volume of work orders because they regained confidence in the local suppliers after the strengthening of workplace safety with the recommendations of Accord and Alliance which mainly brightened the image of the country.

For instance, currently of the top 10 green garment factories of the world, nine are in Bangladesh. Of the top 100 green garment factories of the world, some 40 are also in Bangladesh.

Currently, some 148 garment factories are Leadership in Energy and Environmental Design (LEED) certified by the United States Green Building Council (USGBC) are in the country. Of the number some 44 are platinum rated and some 91 are gold standard.

Some 500 garment factories are waiting to be certified on LEED by the USGBC, Hassan also said.

Hassan said the prices of garment items also went up to some extent because of the price hike of the raw materials like cotton, yarn, chemicals and freight in the supply chain.

The fright charge went up by 100 percent to 400 percent varying cases, he said. This is why the increased value cannot offset the cost of production.

The cost of production went up by 30 percent over the last eight years.

The price of garment items déclassé by more than 8 percent in the USA over the last one year and 2.35 in the EU during the same time.

So the increased prices could not offset the cutting and making the cost of garment items, Hassan said.

However, Bangladesh’s garment items are going to new value-added items like man-made fiber items now which will ensure better prices for the local suppliers, he said.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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