Economic studies
Textile - Clothing

Textile - Clothing

Textile - Clothing
Central & Eastern Europe
Latin America
Mid-East & Turkey
Northern America
Western Europe
Change sector


  • Growth of the middle class in emerging countries
  • Rise of fast fashion


  • Products with high price elasticity of demand
  • Sector heavily impacted by the health crisis linked to COVID-19 and supply chain bottlenecks
  • Price structure very sensitive to swings in commodity prices

Risk assessment

Risk Assessment

The textile-clothing sector is composed of two branches: textiles on the one hand and clothing on the other. Although linked, the two are subject to different constraints and mechanisms. Textiles provide inputs to the clothing market, mainly cotton for natural fibres and polyester for synthetic fibres.

The textile-clothing sector, which has been struggling for the past decade, is attempting to recover from the COVID-19 pandemic, which severely hurt the sector. With a strong global demand rebound in 2021, the industry may face new challenges related to supply chain disruptions, and increased transportation and production costs, which undermine the sector’s growth.

At the beginning of the pandemic, the sector suffered from lower supply (due to the closure of the shops) and weak consumer demand leading to lower revenue for brands and stores, which were forced to scale back, postpone or scrap clothing orders for the textile industries, causing imports of textile fibres such as cotton to be reduced or cancelled altogether. As restrictions eased and vaccination rates increased, economic growth fuelled increased consumer spending. The effects were very noticeable in terms of cotton prices: while a pound of cotton was trading at USD 0.71 on 9 January 2020, the price reached 1.04 earlier in December 2021, recording decade highs. According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), the demand for cotton will be higher than the supply, resulting in higher prices during the 2021-2022 season (by 14%, according to ABARES), relative to 2020-2021.

The pandemic had strong effects on the industry: this supply and demand shock led to a deterioration in the cash flow of companies in the sector, job losses and even bankruptcies, including that of British group Oasis and Warehouse in April 2020. Business consulting company McKinsey estimates that around 7% of listed companies left the market from January 2021 to September 2021, a rate three to four times higher than usual.

The recovery is very uneven and benefits most to the companies that adapted to new consumption practices. Some trends observed before the crisis were exacerbated by measures taken to counter the pandemic, such as closures of physical sales outlets. Companies that have managed to adapt by collaborating with companies specialised in online sales or by developing these services internally for their customers will be the least impacted by the crisis, since lockdown measures have led to a significant expansion of e-commerce, reinforcing a trend that was already underway before the crisis.

In 2018, global online sales of clothing and footwear accounted for 16% of total sales, compared with 10% in 2012. The rise of e-commerce has been accompanied by a shift in demand from Europe and the United States (U.S.) to Asia-Pacific, where 62.6% of online sales occur.


Notes for the reader

Global cotton crop year starts on 1 August and ends on 31 July of the following year.
The advanced economies are Europe, the United States, Japan, Australia and New Zealand.


Sector Economic Insights
COVID-19 implications, short- and medium-term prospects

The clothing market is very sensitive to changes in economic conditions. According to Coface, world GDP rebounded by 5.4% in 2021 and is forecasted to grow by 4.2% in 2022. The main garment consuming markets, notably the advanced economies and China, experienced the resumption of their economic activity in 2021 (5% vs. -4.7% in 2020 for advanced economies and 7.5% vs. 2.3% for China). While economies still experience restrictive measures and lockdowns, most advanced countries have grown beyond their pre-pandemic level over 2021. The textile-clothing sector benefits from this rebound: McKinsey expects revenues in the global apparel and footwear industry to grow, luxury leading with 16% growth. In 2022, further consumer confidence recovery will drive the increase in spending, but it is likely to be uneven, with the European market lagging behind that of the U.S. and China. The reopening of physical stores benefit the sector, as online sales were unable to offset the losses caused by the closures in 2020, with sales during 2020 declining by 15%-20% in China, 5%-20% in Europe and 30%-40% in the U.S., according to McKinsey. Overall, McKinsey expects the 2022 fashion industry sales to surpass pre-pandemic levels.

The textile-clothing sector is highly globalized. The sector was at first affected by the supply chain disruptions caused by the pandemic. It now faces supply chain bottlenecks, resulting from the lack of capacity in the transport sector. As a result, transportation costs surged through 2021, and the increase is likely to persist in the beginning of 2022. This affects textile-clothing companies’ operating costs and consumers may face increased prices in 2022.


There are strong uncertainties surrounding the evolution of the pandemic and the emergence of new variants (at the time of writing, the latest is the Omicron variant) that could lead to a new set of restrictions and the closure of clothing stores, dampening the recovery of the sector.


Cotton production forecasts, consumption forecasts and price trends

ABARES expects world cotton consumption to increase by 5% in 2021-2022, and exceed the global supply. Consequently, global stock levels will further decline, reaching their lowest levels since 2018-2019 and the commodity’s average price will reach decade highs. ABARES forecasts an average price of USD 0.95 per pound for 2021-2022, up by 14% from the previous season. This price increase would be a threat for clothing companies, whose consumers are very sensitive to price increases, which should lower their margins to absorb the cost increase.

Cotton production should strongly rebound in major cotton exporting countries, the United States and Brazil, because of more favourable weather conditions in the future season. Production should otherwise decrease in China and India, mainly because of dryness, according to ABARES.


Increased use of synthetic fibres compared to natural fibres

The textile-clothing sector is evolving because of various factors. For one, the use of synthetic fibres (mainly polyester) is increasing at the expense of natural fibres such as cotton. Polyester has several advantages over cotton: its production requires less water and no pesticides. It is also easier to handle and mix with other fibres, and its production is less subject to climatic hazards. The current oil prices favour natural fibres, but incentives to substitute cotton and wool with these synthetic fibres are considerable. Another point worth mentioning is the substantial development of environmentally-friendly natural fibres, driven by consumers’ growing environmental concerns.


Relocation of textile factories to low-cost countries

Textile manufacturing, especially low value-added manufacturing, is shifting from China, which dominates textile manufacturing worldwide, to other economies with lower production costs such as Vietnam, India, Bangladesh and Ethiopia. China's share in global textile exports decreased from 38.3% to 29.1% between 2015 and 2020, according to Fitch Solutions. This trend, which has been exacerbated recently by trade tensions between the U.S. and China, is expected to continue, as higher Chinese wages push up production costs. Textile industries, which change collections very regularly, have an incentive to set up factories in countries where wages are lower. According to a New York University study, in 2019, the minimum monthly wage in Ethiopia was USD 26 compared to USD 326 in China. During the pandemic, supply chain disruptions also enticed some European companies to nearshore textile manufacturing away from China to Turkey and Eastern Europe.


Demand is shifting from Europe and the U.S. to Asia

As demand for clothing from Asia (mainly China) grows, the importance of Europe and North America in this sector is declining. Sales of clothing products outside North America and Europe equalled sales in these regions in 2018 and are expected to reach 55% of total world sales of clothing products in 2025. The Asia-Pacific region (Vietnam, Philippines, Indonesia, Malaysia, Thailand and Singapore) is highly attractive to the apparel sector, especially because it has a large proportion of young people, for whom digital solutions play an important and growing role. The three largest e-commerce websites in this region (Lazada, Shopee and Tokopedia) saw the gross value of their merchandise sales increase sevenfold between 2015 and 2018. The luxury industry has also been affected by the shift in activity in the sector: China generated the strongest rebound in the luxury sector, and this growth benefits its domestic companies the most as travel restrictions weigh on the demand from China for European luxury products. Another important transformation that is taking place in the clothing market is the rise of fast fashion, particularly in advanced economies and China. The term refers to a strategy used by brands that consists in changing their clothing collections very quickly in order to stimulate and increase the frequency of consumer purchases. A direct consequence of this evolution is the shorter lifespan of clothes, which are now kept for half as long as they were ten years ago.


Last update : February 2022

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