Textile sector complex catastrophi equation revealed - The complex equation of the textile sector: halfway between a slight recovery in sales and 30,000 jobs on a tightrope.

"The data are catastrophic, we are in survival mode", confessed the president of Acotex, Eduardo Zamácola, a little more than a month ago when he made public his annual report. He did not exaggerate: 2020 had ended with a fall in sales of 41%, to 10,619 million euros, while the sector had lost 26,700 jobs and assumed the closure of 14,800 stores.

Now, summer seems to show a reason for hope. Mind you, very fucked with tweezers. The latest barometer developed by the organization reveals that sales barely decreased in June by 0.3% compared to the same month of 2020, it means talking about the slightest decrease since the pandemic began.

"The data is positive, but you have to take it with tweezers. In June, all sales are promotions and sales, so in many cases the margins disappear”, says Zamácola and collects Five Days. In fact, despite the upturn in June, sales are 35% below pre-crisis levels.

The annual accumulated rate continues to show a negative fall of 29.8%, which only shows how bleak the previous months have been. Last year, at the height of the pandemic, the fall in turnover even fell by 72.6%. It should be explained that during the financial crisis of 2008, sales fell by 11 % and it was already the worst year for the sector.

Textile sector complex catastrophi equation revealed

This slight and discreet recovery remains clouded by the labour market. This debacle of figures had meant the loss of 26,700 jobs in 2020. The sector had gone from employing 199,112 people in 2019 to doing so with 172,432 at the end of 2020.

This incontestable reality was followed by another worse prediction. Zamácola explained a month ago there would be a greater adjustment of staff, since the data of destroyed jobs was "anesthetized", in part by the effect of the ERTE.

In this sense, the manager explained that during the pandemic had closed 25% of the shops and this had only ended with the destruction of 13% of employment. "These 12 points of difference point to the 30,000 workers who are in force majeure and will not regain employment when the suspensions of employment disappear," the president points out.

Textile sector complex catastrophi equation revealed

Given this, Zamácola is upset with the labor regulations arising from the pandemic: "It does not make sense that with a 40% drop in sales you can not lay off and that you have to ensure jobs until six months after the end of the force majeure. We have asked the Government to help us lay off and a good instrument would be the Wage Guarantee Fund (Fogasa).”

The employers 'association, which speaks of" inevitable dismissal", points out that it has not yet obtained any response from the Administration. In any case from Acotex they emphasize that it is important to maintain the force majeure erts with their bonuses until they recover completely the normality.

Before the sales started, the Spanish Confederation of Commerce (CEC) expected that the volume of sales for the campaign, which began to a greater extent on June 24, would be reactivated with respect to last year.

Textile sector complex catastrophi equation revealed

The employers, of course, spoke of "slight improvement" and always against the data of the 2020 campaign. He warned that the figures would be far from those recorded in 2019. In this way they estimated that the turnover could still fall between 20% and 30% with respect to that year.

Regardless of how the balance of these sales will be, the first indicators are not good. At least in terms of store influx. The platform of catalogs and digital offers Tiendeo, details that in the first 10 days of sales the flow of consumers to physical stores in Spain had decreased by 45% in relation to the summer sales campaign 2020.

But if the influx to stores falls, so did the purchase intention (-41%) with respect to the values of the previous year. The same goes for the 59% drop in the volume of sales and offers searches.

Textile sector complex catastrophi equation revealed

More news:

The rise of steel and other industrial metals unleashes a ' boom’ in the real estate market: thus it can affect the price of housing

Overall commodity prices have risen by 21% so far this year, surpassing the 11% increase in global stock markets, just after a decade of commodity pressure.

Against this background, industrial metals have risen 18% this year, only behind the rise in the price of oil, which has experienced a huge rally in 2021.

3 key catalysts have been powering commodities in general, and industrial metals in particular this year. Aneeka Gupta, director of analysis at WisdomTree Europe, and Mobeen Tahir, associate director of analysis at the same firm, explains the increase in inflation levels is a key factor in understanding this behavior.

"It is a symptom of the improvement in economic activity, but it also creates an increased demand for investment by investors as commodities that offer a hedge for portfolios," they describe.

Second, the renewed focus on infrastructure spending by Governments around the world to induce growth has increased the prospects for demand for core resources. And, finally, they expose, the energy transition, which has also put the focus on the metals that are allowing the change towards cleaner alternatives to hydrocarbons. "It is likely that the 3 trends will continue beyond 2021", they specify.

But the price of these commodities may not have hit their ceiling yet. ” If the cyclical recovery continues, infrastructure spending begins to occur and long-term issues such as the energy transition continue to accelerate, industrial metals have the potential to enter a supercycle, " Gupta and Tahir anticipate.

Commodities are facing a strong recovery in demand (the global GDP forecast is a 6% rebound this year), a low supply (after a decade of low investment, given low prices), and the search for assets with good returns by investors who have historically performed well.

In the opinion of Ben Laidler, eToro's global market strategist, these drivers are likely to remain: "This would support further increases in commodity and industrial metal prices.”

The question is, how does this move towards the consumer? Can it affect the price of housing as the products are more expensive? And, above all, whether this situation will be temporary or if something can be perpetuated in time.

According to Laidler, the National Association of Home Builders of the United States estimates that the costs of building materials increased by 26% during the last year. "This has contributed to the increase of 14.9%, maximum in 15 years, in housing prices," he says.

This panorama invites us to think that the price of real estate will continue to heat up. Above all, with the reactivation of post-pandemic economic activity.

Laidler argues that housing is by far the most important component of the consumer price index, with a weighting of over 30%. “So far, it has risen significantly below overall inflation, but is expected to recover and accelerate in the future,” he says in this regard.

Gupta and Tahir confirm that higher prices for industrial metals (such as steel and copper) are certainly skyrocketing house prices, although demand trends tend to dominate market dynamics even more than supply when it comes to the real estate market.

"With low interest rates, the improvement of the labor market, the change in lifestyles since the pandemic and government incentives in certain cases, the demand for housing is strong in many major economies so, in such an environment, buyers end up absorbing higher costs by paying higher prices,” he says.

Will this scenario have an impact on a greater upturn in inflation and housing prices? Analysts agree that one would expect inflation in the price of housing with this supercycle in basic resources for construction such as steel or copper.

However, as to whether or not it will be conjunctural, for WisdomTree experts, it will depend on the dynamics of individual geographies and markets. "If a market is structurally underserved, price increases may end up being more durable," they say.