US Apparel Imports Pick Up, Retail Sales Are Down

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The latest Global Port Tracker report by the National Retail Federation and Hackett Associates found that imports at America’s major retail container ports are expected to continue at near-record levels this month.

The same is expected for the remainder of the year as well despite a new round of tariffs on goods from China. US ports covered by Global Port Tracker handled 1.8 million Twenty-Foot Equivalent Units in June, the latest month for which after-the-fact numbers are available. That was down 2.9% from May and down 3% year-over-year. July was estimated at 1.86 million TEU, down 2.6% year-over-year.

Looking ahead the forecasts are:

  • August — 1.91million TEU, up 0.6%
  • September — 1.85 million, down 1.1%
  •  October — 1.91 million TEU, down 6.2%
  • November — 1.84 million TEU, up 1.8%
  • December — 1.81 million TEU, down 7.9%

The August and October numbers would be the highest monthly volumes since 1.96 million TEU last December, tying for the third-highest month on record behind that and the all-time record of 2 billion TEU set last October. While imports will decline year-over-year most months during the remainder of this year, that is largely because of high volumes seen last year as retailers rushed to bring in merchandise ahead of scheduled tariff increases.

The first half of 2019 totalled 10.5 million TEU, up 2.1% over the first half of 2018, and 2019 is expected to total 21.7 million TEU. That would come within 0.4% of last year’s record 21.8 million TEU, which was up an unusually high 6.2% over 2017.

US President Donald Trump announced that new 10% tariffs on an additional US$ 300 billion in Chinese goods will take effect on September 1. Coupled with 25% tariffs imposed on US$ 250 billion worth of imports over the past year, the new round will tax almost all goods the United States imports from China. Meanwhile, America’s tariff bill continues to grow. According to data released by the Tariffs Hurt the Heartland coalition, American importers paid US$ 6 billion in tariffs in June, one of the highest-tariffed months in US history and up 74% from the same month last year.

US apparel retail sales are marginally down
US apparel sales during January-May 2019 were around US$ 213 billion, 0.12% lower than during the same period of 2018. Apparel accounts for around 16% of total retail sales in the US. Clothing retail inventories were around US$ 50-52 billion per month during this time.

According to analysts, US shoppers are reluctant to spend on apparel, despite low unemployment rates. With the result that retailers are burdened with huge inventories, which will eventually hurt their profit margins.

E-commerce sales however, continue to grow across all retail segments, including apparel. E-commerce accounts for 10.2% of total retail sales in the US. In the first quarter of 2019, e-commerce sales grew 3.6% compared to the previous quarter, and 12.4% compared to the same quarter a year ago. While growth remains strong, there is a slight slowdown here too, compared to the growth rates of 15-16% in 2016 and 2017.

US apparel imports from Asia are rising
US apparel imports during the first six months of 2019 went up by 5.91% to US$ 40047.56 million compared to the same period of 2018. And US buyers are heading back to Asia for 73% of their apparel requirements.

“Even with virtually everything American imports from China soon to be subject to tariffs, it isn’t quick or easy for retailers to change their supply chains,” NRF vice president for Supply Chain and Customs Policy Jonathan Gold said.

China remains the largest supplier of apparel to the US market, accounting for a share of 28.23% of total US apparel imports during January-June 2019. Imports from China have shown a nominal growth of 0.68% during the period, to US$ 11304 million. This translates to around 5% of total US apparel retail sales.

The US is China’s single largest apparel export market, with a share of 21.45%. The country’s exports to the US in June were 11.20% lower than in January 2019.

Vietnam is the second largest apparel supplier to the US, with a share of 15.88% of total US apparel imports. Vietnam’s apparel exports to the US increased 11.74% during the first six months of 2019 to US$ 6361.11 million, compared to the first six months of 2018.

US accounts for 35% of Vietnam’s total apparel exports.
Bangladesh is the third largest apparel supplier to the US market, with a share of 7.7% of total US apparel imports during January-June 2019. During the first six months of the year, Bangladesh’s exports to the US grew 14.49% to US$ 3081.95 million. With the US-China trade war, Bangladesh is emerging a gainer.

In the Asian region, Indonesia is another important apparel supplier to the US, accounting for 5.69% of total US apparel imports. Indonesia’s apparel exports to the US during January-June 2019 amounted to US$ 2277.49 million, a growth of 2.35% compared to the same period of 2018. However, exports seem to be slowing down, as Indonesian apparel exports to US in June were 10.63% lower than in January 2019.

India’s apparel exports to the US in the first six months of the year have shown a strong growth of 10.43%, compared to the same period of 2018.  Exports in the first six months of 2019 amounted to US$ 2267 million.

India’s apparel exports in June 2019, were down 19.7% compared to May 2019. In May too, US imports from India were down 4.83%. Since March, India’s share in total US apparel imports has taken a slight beating, from 6.67% to 4.5% in June.

A monthwise comparision of US import data shows that in June, apparel exports of most of the leading Asian countries to the US slowed down, even as total US apparel imports grew 4.15%. Cambodia, within a short span, has managed to rake in a share of 3% of total US apparel imports. During January-June 2019, Cambodia’s apparel exports stood at US$ 1205.28 million, to the US, a growth of 8.3% over the same period of the previous year.

US apparel imports from Myanmar grew 46.31% during January-June 2019, compared to the corresponding period of last year. This is despite the political upheaval in the country, which could be attracting sanctions from Europe. Myanmar accounts for just 0.23% of total US apparel imports. Myanmar’s apparel exports to the US in the first six months of 2019 amounted to US$ 93.78 million.

Realisations are improving
India’s average UVR is around US$ 3.56, and has shown a slight improvement of 1.33% in the last six months. China’s average UVR in the last six months has been around US$ 2.29. China’s UVR has gone up by 2% during the six months of 2019. A 10% tariff on Chinese apparel to the US market would still keep China fairly competitive.

Bangladesh, has a higher average UVR of US$ 2.85, which increased by 11.46% in June compared to January. Vietnam earned a UVR of US$ 3.21, much higher than China’s average realisation. Here too UVRs improved by 11.24% in the six month period.

Cambodian apparel UVR is around US$ 2.61, and witnessed an improvement of 9.86% in the last six months. Malaysia, which supplies more value-added apparel to the market, earns an average UVR or around US$ 5, which has improved by almost 11% in the last six months.

Japan’s UVRs are around US$ 20.7, and improved by 10.81% in the last six months.

LATAM’s share in US imports is down
Latin American countries, which are gaining ground due to proximity with the single largest apparel consumer market, enjoy a share of 16.45% in total US apparel imports. This share today is lower than the nearly 20% share that these countries had raked up earlier in March.

Clearly, Asia and South America will remain the top suppliers to the US market. Mexico accounts for a share of 4.05% of total US apparel imports. US imports from Mexico during Jan-June 2019, at US$ 1604.65 million were 3.49% lower compared to  the same  period of 2018. In June 2019, imports from Mexico at US$ 281.20 million, were 16.72% higher than in January. Other important suppliers in the region include Honduras, El  Salvador, Nicaragua, Guatemala, Dominican Republic.

Canadian apparel exports fell 7.81% during the period to US$ 287.25 million. An analysis of the unit realisations reveals that no country in this region is able to meet the low prices of China. UVRs in Mexico are around US$ 3.95. There was an improvement of 2.83% in the first six months of 2019. Canada, which is part of the new USMCA deal, offers high value fashion apparel to the US market, earning UVRs of  US$ 12-13. However, there has been a fall of 5% in Canada’s UVR.

US  apparel  imports from Europe move  up
Europe accounts for around 3.5% of total US apparel imports. Here Italy is the largest supplier. Imports from Italy in H1 2019 stood at US$ 667 million, 7.1% higher than in H1 2018. However, imports from Italy have picked up only in May and June. There was a continuous fall in US apparel imports from Italy in the beginning of the year.

Imports from Turkey at US$ 307.31 million, were 6.09% higher than in H1 2018. However, imports in June were 8.26% lower than in January. US imports from Turkey had recorded a good growth in January and February.

Imports from UK have grown 12.33% in H1 2019 to US$ 49.24 million. Overall, imports from the European Union went up by 6.76% to US$ 1177 million during H1 2019, compared to H1, 2018.

Average UVRs in the European Union have picked up by 20.62% during January to June. In June, average UVRs were around US$ 17.82.

US targets Chinese currency
Last week, the Chinese remnimbi weakend by 2.6%. The Chinese currency was not the only one to devalue within a day. Indian rupee too weakened by 3.04%. And then a further 0.36% on August 13.

Financial experts and agencies blame the US tariff war with China for this sudden devaluation, even as US has branded China a `currency manipulator’.

Currency fluctuations will need to be taken into account when looking at how tariffs will impact the final cost of buying from various countries. It would be naïve to assume that US buyers will want to bear the full burden of the higher tariffs on Chinese goods. China’s apparel exporters will have to rework prices to compensate for the higher US tariffs. As we can see, garments from China will still be priced competitively, but the tariffs sure give a reason to retailers to increase retail prices, especially at a time when their profit margins are hurt for reasons other than China and Asia.

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