Industry Report by UniCredit Bank Austria:
Textile industry heads for a moderate upturn in 2017
- Revenue in the textile industry saw a slight fall of 1% in nominal terms to 1.4 billion euros in 2016
- The economy in the industry is recovering in 2017, and an increase in production in the low single figures is possible
- Austrian textile industry demonstrates its competitiveness with export successes
- Significant lead in growth compared to European competition
The Austrian textile industry recorded drops in production and revenue of 1% respectively in 2016, following two very positive financial years. Revenue fell to 1.4 billion euros. As the latest Industry Report from the UniCredit Bank Austria economists shows, there was a particular shortfall in domestic orders in the sector, which were only partially balanced out the previous year by an increase of 3.5%. in foreign revenue. Despite the slight downward trend in 2016, overall the results from the previous three years confirm that the trend in the sector has stabilised.
"The restructuring of the domestic textile industry, which has resulted in the number of jobs approximately halving over the past two decades, may well have peaked. While a further, moderate reduction in capacity cannot be ruled out, the domestic textile industry is showing its competitiveness in the fact that, for years it has been able to balance out the decline in domestic demand, due to the erosion of the clothing industry in particular, by increasing foreign revenue", explains Günter Wolf, economist at UniCredit Bank Austria.
Economic recovery in 2017
The economy in the sector has stabilised over the first quarter after a poor start to 2017, and should continue to gain momentum as the year goes on. The rising production and revenue figures in March are reflected in the very positive business confidence figures in recent months and are supplemented by relatively optimistic production expectations from companies for the second quarter of 2017.
This upturn is anticipated against a backdrop of improved economic growth rates in important Western and Eastern European markets, and particularly in France, Poland, Hungary and the Czech Republic, which are destinations for almost 20% of domestic textile exports. This will compensate for the lacking momentum in demand in Germany, the most important individual market for Austrian textiles, with an export share of 28% (the latest forecasts from the German Association of Textile and Clothing Manufacturers place the increase in revenue below 2%). Foreign revenue in the industry rose by around 5% in the first quarter. Nevertheless, the textile industry in Austria cannot expect a boost to its growth, as has already been indicated by the 6% fall in domestic revenue up to March. An increase in production in the textile industry in the low single figures is possible over 2017 despite this.
According to Günter Wolf at UniCredit Bank Austria, the growth in the textile industry in 2017 is once again hinging on demand for textiles for technical applications. These products achieved an increase in revenue of 1% over 2016, going against the trend in the industry, accelerating to a considerable 13% over the first two months of 2017 according to provisional figures. In contrast, the somewhat large fall in revenue from weaving, textile finishing and knitted materials is continuing in 2017. The 5% fall in spinning mills in 2016 has at least been tempered.
Export successes underline the competitiveness of the textile industry
Foreign revenue accounts for 71% of the overall revenue in the textile industry, far exceeding the industry average of 59%. "Austria's textile industry was not only able to prevent a higher shortfall in 2016 when it came to exports, but also ensure its economic survival in the long term with its export successes", says UniCredit Bank Austria economist Wolf. “This was facilitated by the comprehensive restructuring process and the accompanying boost to the industry's competitiveness.”
By 2002, the export surplus for textiles from Austria had reached a record high of 250 million euros. The Austrian foreign trade balance for textiles subsequently went back into decline. In 2016, this amounted to a deficit of 98 million euros. Although the textile industry was able to defend its position against Western European competition, it was faced with a growing flow of imports after 2002, above all from China, due to the opening up of the European textile market. The domestic textile industry nevertheless profited from the opening up of the market after the crisis in 2009 in particular. Between 2009 and 2016, foreign revenue in the industry grew by 24% in total to approximately 1 billion euros, completely offsetting the downturn in domestic revenue of 8%.
Lead in growth compared to European competition
Austria's textile industry has demonstrated its competitiveness compared with the rest of the industry in Europe, and has been able to develop a lead in growth after 2009 in particular. Production output grew 16% between 2009 and 2016, in contrast to just 5% in the EU28 (whereby the textile industries in all the major manufacturing economies – Germany, Italy, Great Britain, France and Spain – grew more slowly).
The success of domestic textile manufacturers is primarily based on improved productivity and a focus on high-quality products. With a value added of 60,000 euros per employee, compared to the EU average of 39,000 euros, the industry has become a European leader. "Textile manufacturers in Austria have only been able to survive financially in innovative niche sectors. Judging by the pronounced appetite for research and innovation in the industry, they should continue to be successful in the future as well", says Günter Wolf.
In total, textile and clothing manufacturers invest almost 1% more of their revenue in research and development than their equivalents in the major manufacturing economies of Europe. In addition, 74% of the companies in the textile and clothing sector in Austria are considered "innovation-active" according to the European Community Innovation Survey. This proportion is above the average for the industry – 64% – and has been rising for years.
Enquiries: Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0) 50505 - 41954;