Economic Update

The EU textile and clothing (T&C) industry continues to face significant challenges in the beginning of the year, due to weak consumer demand, rising competition from low-cost imports, and declining global exports. Turnover saw a substantial decrease in 2024, with continued drops in the first quarter of 2025 (-2.4% in textiles and -2.3% in clothing, on a year-on-year basis). Production in textiles has been falling since early 2022, especially in woven, knitted and crocheted fabrics. The start of the year shows notable y-o-y declines in weaving and finishing. Clothing output dropped even more sharply, as compared with the first quarter of 2024, particularly in knitwear. Lack of demand remains the single most important factor limiting production and business activity, followed by labour shortages.

Employment in the sector is declining, compared to pre-COVID levels, due to restructuring, high costs, and skill shortages. The evolution of the EU workforce during the first quarter 2025 deteriorated both, as compared with the previous quarter and as compared with the previous year. Energy and labour costs remain high, with wages rising and gas/electricity prices increasing. While textile prices stayed flat, clothing prices rose due to input costs. Regulatory burdens and compliance costs add further strain. Although inflation is easing, clothing consumer prices have been falling since late 2023, reflecting cooling demand. On the external side, EU imports of T&C from third countries rose sharply, while exports declined, leading to a 52% year-on-year increase in the EU27 trade deficit. This shift was driven by rising imports from Asia and changes in global sourcing amid tariff and policy uncertainty.

The EU business sentiment in June 2025* showed a slight improvement in the textile industry, but a strong deterioration in the clothing sector. The positive trend in the textile industry was mainly driven by managers’ brighter opinion on the adequacy of stocks of finished products and improved production expectations. By contrast, confidence on their order-book levels, export order-book levels and employment expectations, which are not included in the headline indicator, worsened. Besides, confidence in the clothing industry saw a notable deterioration, driven by declines across all three components (i.e. managers’ assessments of the current level of order books, stocks of finished products, and production expectations). Furthermore, among the questions not included in the confidence indicator, managers expressed increased pessimism regarding employment expectations and their export order books.

For more information on our Economic Update, please contact Roberta Adinolfi.