Economic Update

The T&C sector showed stable economic performances during the fourth quarter of 2023, as a result of slowly improving market conditions. The textile industry managed to stabilise business activity, on a quarter-to-quarter basis. In the clothing segment, turnover evolution brightened only marginally, while output reported a slight drop. Similarly, the labour market evolution remained broadly stable in the textile industry but indicated a slight decline in the clothing sector. Besides labour shortages and weak demand, input costs were still impacting companies in the sector. Finally, the EU27 trade deficit improved, resulting mainly from a decrease in clothing imports and more dynamic exports.

These trends are in line with the broader economic performance of the European economy. The European Commission reported¹ that the real GDP barely grew in the first three quarters of 2023 and contracted towards year-end. The loss of growth momentum has been underpinned by the lack of a solid growth driver, with weakness especially in consumption but also on the external side. Increasing wages, continued employment growth and further slowing of inflation are expected to lift the purchasing power of households in 2024 and 2025, boosting consumption. According to the Commission forecasts, economic activity is expected to gradually pick up, with EU GDP increasing by 1.3% in 2024 and 1.7% in 2025.

Looking forward, the business sentiment in the T&C industry is improving and getting closer to the long term average, suggesting that economic activity will expand in the first half of 2024. The EU Business Confidence² indicator for the months ahead picked up in the clothing industry, driven by an improvement of all its components (i.e. managers’ expectations of production for the months ahead, their assessment of order-book levels and adequacy of stocks of finished products). Also the business sentiment in the textile sector improved in March, as managers were somewhat more positive about their production expectations and the adequacy of stocks of finished products. By contrast, the assessment of order-book levels in the textile industry deteriorated.

¹ EU Commission’s Mar. 2024 survey: European Business Cycle indicators and Business Consumer Survey (subsector database)
² DG ECFIN, “Autumn 2023 Economic Forecast: A modest recovery ahead after a challenging year”

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