Apparel exports show decline despite full order books of large-scale manufacturers

Sri Lanka’s apparel industry is currently grappling with a “strange development”, according to an industry expert, with the apparel export earning figures for the first two months of this year recording declines despite the full order books of large-scale manufacturers.
“It’s a strange situation. We discussed this at the last council meeting and all the large producers said that their order books for January and February had been full, unlike in 2016,” Sri Lanka Apparel Exporters’ Association (SLAEA) Chairman Felix Fernando told Mirror Business.
The Index of Industrial Production maintained by the Census and Statistics Department also showed some year-on-year (YoY) growth of apparel manufacturing during the two months.
Fernando said that due to the appreciation of the US dollar against the rupee and the relative parity between the US dollar and euro, a mismatch in foreign exchange when compiling the statistics should be ruled out.
According to the official trade statistics published by the SLAEA, Sri Lanka’s apparel exports for February fell 14.97 percent YoY to US $ 377 million, with US $ 170 million or a 8.81 percent YoY decline in exports to the US, while exports to the European Union (EU) fell 23.57 percent YoY to US $ 155 million. Exports to other markets fell 3.97 percent YoY to US $ 52 million.
Fernando said that one of the plausible explanations could be that the Customs Department not having included some of the exports during February in the statistics for the month and the remainder may appear in the March figures.
“This also happened in January 2016, when some of the exports in 2015 appear next January. So the decline this January could also be due to an inconsistency in the base effect,” he said.
Sri Lanka’s apparel exports for the first two months of 2017 declined 11.48 percent YoY to US $ 788 million, with exports to the US falling 6.38 percent YoY to US $ 368 million, exports to the EU falling 19.14 percent YoY to US $ 310 million and exports to other markets falling 3.25 percent YoY to US $ 110 million.

If there is no statistical error, the fall in exports to other countries may become a major concern, since they bolstered the apparel export figures from August to December 2016 in the wake of political instability in the key markets such as the US and UK to which exports either declined or remained flat.
Fernando said the export figures for March may perhaps shed more light on the situation.
However, one of the country’s largest knit fabric manufacturers said that based on their current work load, exports may remain low in the short-term due to the political instability in the key markets.
“Our third quarter was down and that was factored in the January and February figures due to the delay between our production and exports of products. 
For us, there is no material shift in the situation compared to the past. I think a bit more stability needs to come into the EU and US markets. The conversations are still about elections. There needs to be more bullish spending,” Teejay Lanka PLC CEO Sriyan Wijeratne said.
Sri Lanka will be receiving a decision on its application for the EU’s preferential trade programme Generalized System of Preferences (GSP) Plus next month, which if successful, could boost apparel exports. (CW)