Annual Report 2023

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General Economic Situation and Industry Development

2023 characterized by high level of macroeconomic and geopolitical uncertainty

Industry growth slowed over the course of the year

Revenues of global apparel industry grew between 2% and 4% in fiscal year 2023

General economic situation

In fiscal year 2023, the global economy faced substantial macroeconomic and geopolitical headwinds. These included continued elevated inflation levels despite tight monetary policy, a brief global banking crisis, subdued business and consumer sentiment, as well as mounting geopolitical tensions. While the U.S. economy was able to avoid a broader economic downturn, Europe remained on the brink of a recession, and also China’s recovery after the COVID-19 pandemic evolved slower than originally expected. On the other hand, a gradual easing of inflationary pressure over the course of the year, a normalization of the pandemic-related global production and supply chain disruptions, as well as the robustness of U.S. and European job markets all supported global economic growth in 2023. Overall, growth rates varied strongly across individual sectors and geographies, with the slowdown being more pronounced in advanced economies than in emerging markets. Consequently, in its report published in January 2024, the International Monetary Fund (IMF) expects global economic growth to have slowed to a level of 3.1% in 2023 (2022: 3.5%), proving it to be more resilient than initially expected.

Growth of the global economy1

(in %)

2023 (2022) Eurozone UnitedStates LatinAmerica Asia² China WorldOutput Japan 0.5 (3.4) 0.5 (4.3) 2.5 (1.9) 2.5 (4.2) 5.4 (4.5) 5.2 (3.0) 1.9 (1.0) 3.1 (3.5)

Estimates IMF.

Without Japan.

According to IMF estimates, economic growth in the eurozone slowed noticeably to 0.5% in 2023 following a solid expansion recorded in the prior year (2022: 3.4%). Despite persistent but diminishing inflation and a more restrictive monetary policy, challenges remained due to overall subdued consumer demand, with varying growth rates in key economies. While Germany experienced a contraction of −0.3% (2022: +1.8%) reflecting weak consumption and investment activity, France benefited from relatively robust industrial output and increased demand, recording 0.8% expansion in 2023 (2022: 2.5%). Economic growth in the United Kingdom also decelerated noticeably, reaching 0.5% in 2023 (2022: 4.3%) with the slowdown primarily reflecting the repercussions of tighter monetary policy to curb ongoing high inflation.

According to the IMF, the U.S. economy has been remarkably robust with growth at 2.5% in 2023 (2022: 1.9%), amid solid domestic demand and a strong labor market, despite the significant tightening of monetary policy. In Latin America, growth slowed towards 2.5% in 2023 (2022: 4.2%), as growth of important partner economies weakened and commodity prices fell.

Although China’s recovery was weaker than initially expected following the post-pandemic reopening in early 2023, growth still totaled 5.2% according to the IMF (2022: 3.0%), as the gradual recovery in consumption compensated for the repercussions of China’s property sector crisis. Growth in China was slightly lower than in the Asia region (excluding Japan) as a whole, for which the IMF assumes growth of 5.4% in 2023 (2022: 4.5%). Economic growth in Japan accelerated to 1.9%, reflecting strong foreign trade due to a significant rise in exports (2022: 1.0%).

Industry development

For the global apparel industry, 2023 continued to be dominated by the persistently high levels of macroeconomic and geopolitical uncertainty. Major challenges included continued high inflation and the related pressure on the companies’ input costs and consumer demand, a highly competitive labor market, and general economic volatility. Nevertheless, optimism prevailed in the first half of 2023, fueled by China’s reopening and overall robust demand from European consumers, which was only partially offset by a material softening among American consumers. However, the industry faced mounting headwinds in the second half of 2023, marked by subdued demand in Europe and a slower-than-expected recovery in China, prompting a broad-based normalization of growth rates.

According to a joint study by The Business of Fashion and management consultancy McKinsey & Company published in November 2023, the global apparel industry (excluding the luxury segment) recorded year-on-year revenue growth of 2% to 4% in 2023, thus broadly in line with the prior-year level (2022: 2% to 4%). This development reflects stronger growth in the first half of the year, broadly offset by declining consumer sentiment in the second half of the year.

In Europe, the industry recorded overall solid year-on-year revenue growth of 5% in the first half of 2023. In the second half, however, industry growth slowed to a level of between 1% and 3%, mainly reflecting the overall deterioration in consumer sentiment (2022: 13%). In the important U.S. market, industry growth contracted by −1% in the first half of the year amid comparatively weak consumer sentiment, broadly in line with growth levels of between −2% to 0% assumed for the second half of 2023 (2022: 2%). In China, growth for the global apparel industry remained relatively weak compared to historical levels, reflecting economic uncertainty and a slower-than-expected rebound in consumer demand. Consequently, while the industry recorded robust post-pandemic revenue growth of 10% in the first half of 2023, according to The Business of Fashion and McKinsey & Company, it slowed significantly to a level of between 1% and 3% in the second half (2022: −3%).