The terrorist attacks on the USA and the subsequent war against terrorism have pushed the world textile and apparel industries closer to the brink of recession, according to the latest issue of Textile Outlook International. The deterioration represents a major setback. In 2000, despite a general slowdown in the world economy, the industries looked to be recovering well from the impact of the 1997-98 Asian financial crisis.

But even in 2000 the global recovery masked contrasting fortunes. In industrialised nations the industries continued to suffer from downsizing and restructuring as manufacturing moved offshore. US textile production fell by 3.4% while apparel output was down by 3.3% as the US dollar strengthened, as imports from Asian countries picked up strongly, and as consumer spending priorities shifted away from apparel.

Even Mexico and CBI (Caribbean Basin Initiative) countries suffered a slowdown in 2000 as their exports to the US market were squeezed by higher US imports from Asian countries. During the mid- to late 1990s exports from Mexico to the USA grew rapidly after the North American Free Trade Agreement (NAFTA) gave Mexico quota free and tariff free access to the US market. Between 1997 and 1999 alone, Mexican textile and apparel shipments to the US market grew in volume by 36%.

The best performances in 2000, according to Textile Outlook International, were in Asia. Spurred on by buoyant export demand, especially in US markets, strong advances were recorded by countries in South Asia and South East Asia as export capacity continued to build up. Since the Asian crisis, many of these countries have enjoyed a major boost in competitiveness as a result of currency depreciations.

But since early 2001 conditions have deteriorated throughout the international textile and apparel industries, says Textile Outlook International. South Korea's fabric exports, for example, were down by 15.0% in the first seven months of 2001 after rising by 6.6% in 2000. Yarn sales declined by 15.3%. And apparel sales fell by 14.6% following a 3.2% increase in 2000. Thailand fared almost as badly. Its textile and clothing exports fell by 3.6% in the first half of 2001 after rising by 9.2% in 2000. Even Indian textile and apparel sales to the US market were down by 5.2% in the first seven months of 2001, following a 14.9% increase in 2000.

The sharp braking of the US economy has been a primary cause, although the problem has been compounded by the economic malaise in Japan and continued weakness of the Euro. US consumer confidence has waned against a background of corporate downsizing and rising unemployment. And retail sales have weakened progressively in spite of successive interest rate cuts by the Federal Reserve and aggressive marketing by retailers.

Purchasing patterns in the USA changed in 2001 -- even before September 11. Consumers became more conservative and value oriented, says Textile Outlook International. In an already fiercely competitive retail market, weaker consumer spending on apparel has seriously impacted sales and profitability. Worst hit have been variety chain stores, such as JC Penney, and speciality retailers, notably the Gap. On the other hand, mass merchandisers such as Wal-Mart have fared relatively well in recent months as consumers in search of value for money have switched away from higher-price department and speciality stores. But all retailers have responded by putting greater pressures on apparel manufacturers to lower their prices, to be more innovative in their product offer, and to provide higher levels of service.

The better US apparel companies are responding positively to the challenges. Many are disengaging from direct manufacturing and transferring production to lower cost offshore locations. Others are developing higher growth, higher margin branded businesses through acquisition and internal development. Some are investing heavily in new supply chain technologies.

But most US companies remain very apprehensive about their future, says Textile Outlook International. Overall profitability in the industry has been pared to unsustainable levels. Many companies are burdened with high levels of debt and are ill-placed to survive a prolonged recession. Two major groups, Fruit of the Loom and Warnaco, have already filed for Chapter 11 bankruptcy protection. And there has been a steady stream of plant closures and disposals of under-performing non-core operations. For the short to medium term future, further restructuring and consolidation seem inevitable as competition intensifies and corporate profitability falls.

The terrorist attacks of September 11 severely rocked what was already a difficult and fragile economic situation -- in the USA and globally. Although the effects of the shock were felt immediately by the transportation and hospitality industries, the ripples have spread rapidly throughout the US economy. After September 11, Americans paused to take stock of their lives and attempted to comprehend the scale of the atrocities and the motivations behind them. Businesses and consumers, less confident about the future, have moderated their expenditure plans.

New uncertainties have had a serious impact on consumer spending on textiles and apparel, in both the USA and elsewhere. Retailers have placed fewer orders with manufacturers, and export prices have dropped, says Textile Outlook International.

Much will depend on the depth of the US recession and how long it will take the US economy to recover. Some believe that renewed growth is unlikely before until 2003. Others believe that there will be a recovery as early as 2002. However, this will only happen if consumer confidence turns around and spending picks up.

The attacks of September 11 have led to renewed protectionist sentiments in the USA and a shift in sourcing patterns away from distant locations. In the longer term, however, September 11 will help to accelerate globalisation, says Textile Outlook International. Changes in the world political situation will lead to wider support for more liberal trade in textiles and apparel, to extend the benefits of economic prosperity to a wider range of nations.