The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 01 DEC, 2020

NATIONAL

INTERNATIONAL

Manufacturing GVA grows as IIP shrinks in Q2; companies’ high profit likely helped more than production

The quick rebound in manufacturing GVA growth in the current fiscal’s second quarter has surprised the market, as in the same duration, the growth of industrial production significantly plunged. The manufacturing sector recovered from a 39.3 per cent contraction in Q1 to a 0.5 per cent growth in Q2, while the manufacturing IIP still fell by 6.8 per cent in Q2, according to the Ministry of Statistics and Programme Implementation (MOSPI). The jump in manufacturing GVA against falling industrial production was unusual because both are highly correlated. One possible reason for this could be stellar corporate GVA numbers in Q2, on the back of a massive purge in costs, said a report by SBI Research.

The Centre for Monitoring Indian Economy (CMIE) has also attributed the surprising recovery of the manufacturing growth to the extra-ordinary profit performance by listed manufacturing companies amid the Covid-19 pandemic. These companies reported a 13.7 per cent growth in their operating profit without any significant cut in the wage bill. Consequently, their GVA in real terms grew by 6.9 per cent in the September 2020 quarter, according to CMIE. Smaller companies, with a turnover of up to Rs 500 crore, were more aggressive in cutting cost, displaying a reduction in employee cost by 10-12 per cent.

However, this could turn into a potential headwind in future, in terms of a drag on consumption, SBI Ecowrap report added. The evidence of inventory build-up is also believed to have the potential to drag the manufacturing growth in future.

Though various other sectors, including construction, saw signs of recovery in Q2, only electricity, gas, water supply, and other utility services; and agriculture grew in the quarter, apart from manufacturing. On the other hand, the conditions of financial, real estate, and professional services; and public administration, defence, and other services, further deteriorated in the second quarter.

SOURCE: The Financial Express

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India’s Export Recovery Lags As Asian Peers Race Ahead

India’s exports have rebounded in recent months as the global economy slowly opened up after a Covid-induced shutdown, but the pickup in outbound shipments has lagged that of other Asian economies.

Comparative data of export growth on a three-month moving average basis showed that Vietnam, China and Taiwan have seen the strongest revival, followed by Bangladesh. India and Indonesia have lagged. A moving average is used as it helps smooth out short-term fluctuations over a given time frame.

Vietnam, an exporter of electronics, textiles and machinery, among other items, saw exports rise by 12% on a three-month moving average basis, according to data from DBS Bank. China and Taiwan have seen close to double-digit growth too. Bangladesh has seen 1.3% growth in exports on a three-month moving average basis. India’s export performance has been patchy. The contraction in shipments started to ease in June and exports returned to growth in September. Outbound shipments fell once again in October, dropping 5%.

On a three-month moving average basis, exports were down 3.9% as of October.

Asia’s recovery is led by China, and China’s recovery is led by exports, which have been above pre-Covid levels since mid-year, said a November 2020 research note by Moody’s Analytics. Acceleration in China’s international trade is being felt elsewhere in the Asia-Pacific region, it said, adding that Vietnam, Singapore, Taiwan, Malaysia and New Zealand are other Asia-Pacific economies that have reported a sharp rise in exports. In India, like in Japan, Thailand, Philippines, and Indonesia, trade is rising slowly but is not yet at pre-pandemic levels, the report said.

Radhika Rao, economist at DBS Bank, said there is a clear updrift in regional export performance this year notwithstanding the pandemic. But the extent of buoyancy differs across countries, with China, Taiwan and Vietnam among the front-runners. A key differentiator in export performance is the extent of existing integration in global supply chains, said Manoj Pant, director of the Indian Institute of Foreign Trade. Countries like Vietnam have benefitted because of this, Pant said “India is not among the exporting countries that are a part of the global supply chains. The country has, by and large, stayed out of the world’s supply chains in apparel for instance.”

Pant said the nature of foreign trade has changed and trade is now largely in intermediaries rather than in final goods. As such, exporters of intermediary products may have the upper hand. To be sure, certain categories of Indian exports have also done well. Pharmaceuticals and chemicals are among them. A pick-up in agriculture exports has also helped improve overall performance, Pant added.

Export categories that have remained weak include refined petroleum products, gems and jewellery and machinery. These are all likely to recover with a lag, Pant said. The divergent export performance across countries can also be explained by the fact that the pattern of trade has shifted, with concentrations in tech industries and medical equipment and supplies, showed the analysis Moody’s.

“Outperformance remains differentiated and concentrated in certain pockets such as electronics, driven by computers and consumer electronics, along with pharmaceuticals and inputs for PPE-related products. Performance of traditional sectors, particularly those counting on a lift in discretionary consumption, has been uninspiring.”

Geographical Divergence Exports to the United States, India’s largest export destination, continue to perform well but the South Asian nation hasn’t gained share of exports to this key market. According to country-wise data available with the United States Census Bureau on imports into the country, China’s share rose to over three-fourths of total imports on a three month moving average until September 2020. Most other exporters, including India, have only managed to maintain market share.

Steps announced to improve India’s export performance may take some time to show results. Schemes such as production-linked incentives could enhance India’s manufacturing capacities and drive exports over the medium term. Pant, however, believes that trade is unlikely to be an engine of India’s growth. “Rather, it could be its consequence,” he said.

SOURCE: BloombergQuint

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Government puts off penalty provision for not using QR codes on GST invoices

Sources said that while National Payments Corporation of India (NPCI) was ready to roll-out the QR code feature, the majority of the banks were unprepared despite multiple meetings and support from NPCI.

The lack of preparedness from the banks has forced the government to waive off proposed penalty for not implementing dynamic QR code on invoices issued by GST-registered taxpayers with over `500 crore annual turnover, sources in the revenue department said.

The provision was to penalise businesses not using QR codes on their invoices from December 1 but now it would come into force from April 1. However, the penalty waiver is contingent on businesses using QR codes from the start of the next fiscal year.

The move is aimed at promoting digital payment in business to customer (B2C) transactions through QR code and enabling GST payment on UPI — a digital retail payment option.

Sources said that while National Payments Corporation of India (NPCI) was ready to roll-out the QR code feature, the majority of the banks were unprepared despite multiple meetings and support from NPCI.

SOURCE: The Financial Express

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INTERNATIONAL

UNIQLO and Marimekko co-created limited-edition holiday collection

UNIQLO has teamed up with Finnish design house Marimekko once again on a limited-edition capsule. The range includes a selection of modern silhouettes featuring soft and rich textures throughout, as well as bold prints and vibrant colorways.

Celebrating the joyous feeling of togetherness at this time of year, the new UNIQLO and Marimekko limited-edition holiday collection evokes the warmth and coziness of being at home in winter with family and friends.

Clean design and practical function come together with rich textures and vibrant shades in simple, versatile pieces to wear all day, every day.

“Challenging times have made it more important than ever to connect with close friends this holiday season,” said Yuki Katsuta, Head of R&D at UNIQLO, in a press release.

“Themed ‘Joyful Together,’ our new collection combines the signature simplicity of UNIQLO apparel with Marimekko’s warm and spirited prints to celebrate togetherness at this special time of year. We hope people everywhere will feel comfortable and at ease in the new line,” Katsuta adds.

The collection consists of poplin dresses featuring Marimekko’s iconic prints, modern tailoring and waist-accentuating belts. This season, the duo has added warm flannel items, along with premium merino blend knitwear. Elsewhere, the Ultra-Light Down coats sport modified collars, while the leggings, turtlenecks and socks have been made out of the Japanese brand’s signature HEATTECH technology.

Marimekko x UNIQLO’s holiday collection for women and children ranges from $9.90 to $149.90 USD, and is now available online and at select UNIQLO stores.

SOURCE: Textile Today

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Russian scientists develop new 3D print technology that uses Fused Deposition Modeling (FDM)

The scientists of A.N. Kosygin State University, Russia have developed a 3D printing technology for the fashion industry specifically geared for the fashion industry.

According to the information released by the university, the scientists have opted for Fused Deposition Modeling (FDM) process to develop this 3D printing technology that uses a continuous filament of a thermoplastic material – polyurethane.

The new technology melts polyurethane and it forms the designed product as the properties for the polyurethane in the melted state allow the polymer threads to stick together.

The print-head moves with computer control in order to define the shape of the printed garment.

It’s worth mentioning here that it was quite difficult to print woven fabric from individual fibres using this technology previously but this newly developed technology claims to print woven fabric too.

The developers have also done a cost comparison and said, “The cost of using FDM is approximately US $ 0.92 cents, while the same in case of the use of 3D laser is US $ 66 for the 10 cm X 10 cm size of fabric sample.”

The new 3D print technology aims at boosting domestic manufacturing and bringing back the jobs for the people associated with middle-class and to have better quality control on the garments.

SOURCE: Apparel Resources

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U.S. housing, manufacturing data suggest economic recovery slowing

Contracts to buy U.S. previously owned homes fell for a second straight month in October as an acute shortage of properties pushed up prices, though the housing market remains supported by record low mortgage rates.

Other data on Monday showed activity at factories in the Midwest and Texas slowing this month, likely as a nationwide resurgence in new COVID-19 infections curbed new orders and disrupted production. The reports support expectations of a sharp slowdown in economic growth in the fourth quarter because of the raging coronavirus pandemic and depleted fiscal stimulus.

“Storm clouds are gathering,” said George Ratiu, senior economist at realtor.com. “This winter could pose an unusual challenge for many people across the country, unless Congress takes significant actions.”

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, decreased 1.1% to 128.9. Economists polled by Reuters had forecast pending home contracts, which become sales after a month or two, would rebound 1.0% in October.

Compared to a year ago, pending homes sales jumped 20.2% in October. The monthly decline in contracts suggests a slowdown in sales of existing home sales after they accelerated in October to their highest level since November 2005.

The housing market is being driven by record low mortgage rates. The COVID-19 pandemic, which has seen at least 21% of the labor force working from home, has led to a migration from city centers to suburbs and other low-density areas as Americans seek out more spacious accommodation for home offices and schools.

The coronavirus recession, which started in February, has disproportionately affected lower-wage earners. At least 20 million people are on unemployment benefits. The 30-year fixed mortgage rate is around an average 2.72%, according to data from mortgage finance agency Freddie Mac.

U.S. stocks were trading lower on Monday. The dollar was steady against a basket of currencies. U.S. Treasury prices were mixed.

The United States is in the grip of a fresh wave of COVID-19 infections, with more than 4 million new cases and over 35,000 coronavirus-related deaths reported so far in November, according to a Reuters tally.

The resurgence is happening at a time when more than $3 trillion in government coronavirus relief has lapsed. The fiscal stimulus helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls, leading to record economic growth in the third quarter.

RISING LAYOFFS

Applications for unemployment benefits have increased for two straight weeks and about 13.6 million Americans will lose government-funded jobless benefits a day after Christmas. Another package is expected only after President-elect Joe Biden is sworn in on Jan. 20. President Donald Trump is consumed with contesting his electoral loss to Biden.

A second report on Monday showed the Chicago Business Barometer dropped to a reading of 58.2 in November from 61.1 in October. A reading above 50 in the index produced with MNI indicates expansion in factory activity in the Chicago area. The survey’s new orders measure dropped for the first time since May, when the recovery from the pandemic started.

The moderation in factory activity was corroborated by another survey from the Dallas Federal Reserve showing its production index, a key measure of state manufacturing conditions in Texas, tumbled to a reading of 7.2 this month from 25.5 in October. Factories in the region reported a significant slowdown in new orders, and were less upbeat about the outlook.

The surveys, together with reports earlier this month showing a cooling in activity in factories in New York and the mid-Atlantic region, suggest national manufacturing moderated in November after accelerating in October.

The Institute for Supply Management is scheduled to publish its November survey on Tuesday. According to a Reuters survey of economists, the ISM national manufacturing index likely fell to a reading of 58.0 from 59.3 in October.

“The manufacturing sector is continuing to recover but remains below pre-pandemic levels,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “The threat now comes from virus outbreaks that could interrupt activity, disrupt supply chains and weigh on demand.”

Robust demand for housing has outstripped supply, boosting home prices out of the reach of many first-time buyers, despite builders ramping up construction. The government reported this month that single-family homebuilding, the largest share of the housing market, raced to the highest level since April 2007.

Though homebuilder confidence is at historic highs, builders have complained about shortages of land and materials.

In October, pending home sales edged up 0.1% in the South. They were unchanged in the West. Contracts dropped 5.9% in the Northeast and fell 0.7% in the Midwest.

“We expect a resurging pandemic, faltering recovery, and depleted inventories to weigh on home sales, particularly if no additional fiscal stimulus is forthcoming,” said Nancy Vanden Houten, lead economist at Oxford Economics in New York.

SOURCE: Reuters

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China's factory activity expands at fastest pace in over three years

China’s factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.

Upbeat data released on Monday suggests the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis. It was also higher than the 51.5 median forecast in a Reuters poll of analysts.

“The rise in November manufacturing PMI, with broad-based improvements across the sub-indices, suggest the recovery momentum in the industrial sector has become more certain,” Zhang Liqun, analyst at China Federation of Logistics & Purchasing.

“But the results also showed inadequate demand is still a common issue facing firms. We need to consolidate the policy support aimed to expand domestic demand.”

China’s blue-chip stock market index hit a 5-1/2 year high following the brisk data.

The robust headline PMI points to solid fourth-quarter growth, which analysts at Nomura expect to quicken to 5.7% year-on-year, from 4.9% in the third quarter, an impressive turnaround from the deep contraction earlier this year.

The economy is expected to expand around 2% for the full year, the weakest in over three decades but still much stronger than other major economies that are struggling to bring their coronavirus outbreaks under control.

The official PMI, which largely focuses on big and state-owned firms, showed the sub-index for new export orders stood at 51.5 in November, improving from 51.0 a month earlier. That bodes well for the export sector, which has benefited from strong foreign demand for medical supplies and electronics products.

Also helping activity in November were strong e-commerce shopping promotions, which unleashed solid consumer demand and bolstered confidence for small and medium firms.

But a surging yuan and further lockdowns in many of its key trading partners could pressure Chinese exports, which have been surprisingly resilient so far.

More companies have reported the impact from currency fluctuations, compared with a month ago, said Zhao Qinghe, senior statistician at the NBS.

“Some firms have flagged that as the yuan continues to rise, corporate profits are under pressure and export orders are declining,” said Zhao.

He added the recovery across the manufacturing industry remained uneven. For example, the PMI for the textile industry has stayed below the 50-point threshold, pointing to weak business activity.

CONSUMER COMEBACK

In the services sector, activity expanded for the ninth straight month. The official non-manufacturing Purchasing Managers’ Index (PMI) rose to 56.4, the fastest since June 2012 and up from 56.2 in October, as consumer confidence gathered pace amid few COVID-19 infections.

Railway and air transportation, telecommunication and satellite transmission services and the financial industry were among the best performing sectors in November.

A sub-index for construction activity stood at 60.5 in November, improving from 59.8 in October, as China steps up infrastructure spending to revive its economy.

Monday’s data also showed the labour market is still facing strains. Services firms reduced payrolls at a faster clip in November, data showed, while factories slashed staff for the seventh straight month, although at a slower pace.

“The continued recovery reduces the need for further monetary easing, but any shift to tightening is also unlikely given continued labour market pressure,” said Erin Xin, Greater China economist at HSBC.

SOURCE: Reuters

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