Fashion Economic Trends

Camera Nazionale della Moda Italiana

september 2011

The Italian Fashion Industry: Key Figures

(textiles, clothing, leather, leathergoods, footwear))

t the beginning of september the most obvious feature of the economic situation is a complete uncertainty about the future, with a single tenet: the direction of economic policies will be highly restrictive in Europe and the US. he performance of the Italian fashion industry in 2011 and 2012 will thus be closely dependent - more than in the past from the growth of emerging markets (BRIC), in a context of stagnant if not declining consumption markets in Western Countries. n such a framework, the doubledigit growth in the consumption of fashion in China in the first half of 2011, as well as the still bright 2011-2012 growth forecasts for BRIC Countries provide the industry with some relief. n the first half of 2011 the Italian fashion industry turnover growth has kept a lively pace, although the speed was lower than

T I I

expected, with diverging trends between upstream and downstream sectors. Domestic production volumes on the other hand remained stagnant. he Italian and in general European domestic markets remain weak. Consumption and retail sales of fashion are flat around the level reached in the first half of 2010. talian exports grew at a sustained rate in the first half of the year, double-digit increments are widespread in all sectors and to all major customer countries. he evolution of the international macroeconomic scenario between July and August has led to a general downward revision of all the economic forecasts for 2011. The revision is remarkable for the Italian fashion alike. The sales growth forecast for 2011 is halved, down to +4% from the +8% issued in June.

T I T

Page 2

Fashion Industry turnover growth was lively in the first half of 2011, but slower tha expected
Page 3

Consuption trends are still weak across Europe. Consumer confidence climate is worsening in august Exports scored a very positive growth until the month of May.
Page 4

BRICs watch Forecasts

A snapshot of the current situation in the fashion industry

FIRST HALF 2011: LIVELY GROWTH OF TURNOVER, ALTHOUGH LOWER THAN EXPECTED

n the first half of 2011 turnover growth has shown a lively pace, (+6.4% for the fashion industry as a whole compared to 1st half 2010) although with less intensity than expected. In the second quarter the textile sector (+5.8% in Q2) has been loosing part of its thrust, on the other hand the expected rebound in clothing after the disappointing first quarter did not fully materialise. It must be kept in mind that Q2-2011 figures compare with a corresponding 2010 quarter of strong recovery. urnover in Q2 rose +7.2% for the fashion industry as a whole, closer to the fair Q1-2011 than to the buoyant Q4-2010. roduction volumes went down slightly in Q2 (-3.3%), although scored better than in Q1 (-4.8%). The decrease was stronger(Q2 -5%) in upstream sectors and was the worst record since the end of 2009, it was instead an improvement over the previous two negative Quarters in the downstream sectors (Q2 -0, 9%). he previous releases of FET reported the 2010 outstanding rally in prices of textile raw materials. Since the end of March 2011, the boom has run out and prices have seen significant reductions while remaining still higher than at the early 2010 levels.

T P T

sept 2011 p2

T C T I I T

Domestic consumption and external trade

CONSUMPTION STILL WEAK IN EUROPE, CONSUMER CONFIDENCE CLIMATE WORSENED IN AUGUST

hroughout the first half of 2011, the consumption of Italian households failed to recover the ground lost in the first half of 2010. The Confcommercio indicator of household consumption recorded a new decrease in the first quarter and some recovery only in the last survey in June. lothing and footwear sales do not diverge from the general trend, retail sales remain flat around the the first half of 2010 levels (-0.4% for clothing retail sales, +0.3% for footwear at current prices). he current situation in the other European Countries is not better than in Italy. Retail sales are just slightly better in Germany, but with a worsening drift in the second quarter and keep on being very bad in Spain. Growth of fashion retail sales is is still strong in China, the January- July 2011 figures are up by +24% compared to the same period of 2010. stat indicators of consumer confidence in Italy showed a further decline in August, even if the consumer are pessimistic more about the general economic climate that the personal economic situation. Consumer confidence indicators have been worsening across the EU27 Countries from June on, and in August the decline affected Germany as well.
FOREIGN TRADE: EXPORTS STILL GROWING.

talian fashion exports recovery has continued strong throughout the first part of 2011 (January-May data available), at double-digit growth rates in all sectors: 15.9% in textiles, +14,7% in clothing, +19.2 in leathergoods. The positive trend has spread across all markets, only Spain in clothing, Tunisia in textile and the UK in leathergoods have shown some moderate uncertainty. he Italian trade balance has improved by almost 500mln euros over the first five months of 2010.

sept 2011 p3

T T T G

BRICs watch

he BRIC countries (Brazil, Russia, India and China) currently account for just over 7% of exports of fashion in Italy, but their weight is growing from the mere 3% in 2000. he macroeconomic situation of great uncertainty in Europe and the U.S. makes the Italian fashion industry more dependent than in the past from the growth of emerging markets and BRIC countries in particular, in a context of stagnant if not declining consumption markets in Western countries. he BRIC and western Countries alike will be adversely affected by the hard global macroeconomic scenario as shown by the OECD leading indicators. However, the absolute size of the slowdown will be less pronounced for the BRIC, than for Western Countries. rowth rates in the BRIC countries will remain significantly higher than in Europe and the USA.The latest IMF forecasts of GDP growth for BRIC range from +4.5% up +9.6% for Brazil to China in 2011 and from 4.1% to 9.5% for 2012.

GNP GROWTH FORECAST 20112012 FOR BRIC COUNTRIES

Source: International Monetary Fund

T T T

he latest release of the OECD leading indicators in August (figures for June that anticipate the trends of late 2011-early 2012) showed a general worsening of the outlook including for Germany - that was less affected in pevious months - the U.S. and the BRIC Countries. he overall consumption growth will be flat in Europe for 2011, +0.7% according to the European Commission forecast, it will be lower than the average in Italy (+0.5%) and Spain (+0.2%), just over +1% Germany and France and the UK, in the U.S.is expected to get close to +2%. he to US$ exchange rate (was 1.41 U.S. dollars for 1 Euro un the September 5th) is expected to move in the coming months in a direction more favorable to Italian exports as a result of the financial troubles in many European countries.

Forecast

talian fashion export will thus benefit from a weaker Euro and will recover in 2011 the 20072008 levels.
OUTLOOK FOR THE ITALIAN FASHION INDUSTRY 2011

T T T

IN

he outlook is more uncertain than used to be, as the economic environment itself is dominated by uncertainty and dependent on economic policy choices still to be defined in many Countries. he evolution of the international macroeconomic scenario between July and August has led to a general downward revision of all the economic forecasts for 2011. The revision is remarkable for the Italian fashion alike. he sales growth forecast for 2011 is halved, down to +4% from the +8% issued in June.

Data processing and analysis by Marco Ricchetti