Global business situation shows downward trend: GTIS

On average, 18 per cent of participating companies described their current business situation as ‘good’, 41 per cent judged it ‘satisfactory’, and 40 per cent considered it ‘poor’. The higher share of ‘poor’ compared to ‘good’ yields a negative value and business situation further deteriorated from -19pp in January 2023 to -22pp in March 2023. Interestingly, the share of participants judging the situation ‘satisfactory’ remained rather stable over time, at 42 per cent on average, according to the 19th ITMF GTIS, which was conducted in the second half of March 2023.

Companies around the world and across all segments are faced with a ‘perfect storm’-scenario. On the one side, many costs remain high (raw and intermediate materials) or are still rising like labour costs (higher minimum wages and high wage increases). Furthermore, higher capital costs (due to higher interest rates) are another burden for both the working capital and planned investments.

Energy costs only slowly are coming down due to time-lags in passing the lower spot-prices for energy. On the other hand, demand is relatively weak in most regions due to high inflation rates and cautious consumers that are also struggling with higher interest rates for consumer credits. Inflation rates are falling slower than expected due to rising price levels in general.

Many companies have passed on higher energy prices with a certain delay. It is feared that also higher labour costs will be passed on eventually, which could lead to price-wage-spiral that keeps the inflation rate higher than wanted and might force the central banks to keep interest rates increasing. Of course, the uncertainty about the repercussions of the smaller US banks that had to be rescued and about Credit Suisse, a large international bank in Switzerland, which had to be rescued by the state and its competitor UBS did not help to improve the overall mood.

Regional differences remain strong, improving from East to West. The business situation is still very challenging in Asia where very poor business situations were recorded in all three sub-regions. Trends in Asia are negative with exception of South-East Asia. The indicator for business situation in Europe continues the steady downward path which commenced in the beginning of 2022. High volatility characterises the indicator for business situation in Africa. It now moved to positive territory. Both regions in the Americas reported a steady and continued business deterioration since mid-2022 but remained still in positive territory albeit close to zero (North America) or actually at zero (in South America).

Upstream segments are reporting the strongest weakening in business climate. After holding strongly in positive territory for the longest period, textile machinery manufacturers have now caught up with other segments and record a negative balance. Spinners experienced an improvement in business situation at the end of 2022 until January 2023, but this effect didn’t last. In March 2023 they reported a new decline. The situation for weavers/knitters and the segments further down the value chain is still negative, albeit not following a downward trend. Home textile producers constitute an exception as the indicator for business situation has now plunged to the lowest level ever recorded for this segment.

Fibre2Fashion News Desk (NB)