Economic Update

In the second quarter, the textile and clothing sector showed continued weakness in a context of high uncertainty. Weak demand, and ongoing factors like still elevated energy prices, economic uncertainty, and geopolitical tensions, are further aggravated by a manufacturing crisis impacting the largest textile-consuming sectors, including clothing, construction and automotive.

European production and turnover went down across most textile sub-sectors. Only clothing activity showed a very small sign of positive change. The labour market deteriorated in the clothing industry, while employment in the textile sector slightly recovered from previous quarter’s drop. On the external side, EU trade deficit deteriorated, as imports from third countries rose while export declined, as compared with the previous quarter. The deterioration of the trade balance appeared to be broad-based, involving a large number of products. The negative trends in the sector demonstrate that the industry is still suffering from weak demand, lack of orders and uncompetitive energy costs. These factors are obviously weighing on the recovery of the EU T&C industry.

Looking ahead, the EU business sentiment¹ showed some improvement in the textile industry, while confidence lost momentum in the clothing segment. The September trends in the current levels of order books suggest continued weakness in the sector going forward, amid subdued demand for goods. From the consumer perspective, confidence rose marginally, reflecting consumers’ improving views on their household’s past and expected financial situation. Retail trade confidence remained broadly stable.

These prospects are in line with the broader economic performances of the European economy. The European Central Bank reported that the real GDP is expected to recover in the EU, as real incomes increase further, foreign demand strengthens and the dampening effects of tight monetary policy fade². The continued rise in real disposable income is expected to support private consumption, which should become the main driver of growth from the second half of 2024 onwards.

¹ EU Commission’s Sept. 2024 survey: European Business Cycle indicators and Business Consumer Survey (subsector database)
² Economic Bulletin, issue 6/2024, European Central Bank.

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