The State of the Industry 2015
July 1, 2015
The world economy: key statistics
It was a recovery year, to be sure, but an uneven global rebound kept the lid on the world economy.
For the past three quarters of the year in 2013 and 2014, the United States has been an economic island, showing noticeable improvement in comparison to other major economies around the world. This has been proven by its steady growth in GDP, a better job market and increased consumer confidence and spending, while most other regions—China, Japan and Europe—have endured economic slowdowns. Overall, the impact of these slowdowns has constrained growth in the worldwide economy, including specialty fabrics.
Economic growth in the 18-nation eurozone was 1.2 percent in the first quarter of 2014; however, GDP for 2014 slipped to 0.8 percent and is projected to reach 1.3 percent in 2015. Entering the fourth quarter of 2014 and into 2015, economic performance in the euro area has created concern that it may slip into a triple-dip recession, and there are fears it may fall into deflation. Seven euro area countries are forecast to have public-debt-to-GDP ratios of more than 100 percent in 2015; the proportion of loans in default is rising in Portugal, Italy and Greece.
China experienced weak economic activity in the first quarter of 2014. In response, Chinese leadership implemented measures to stimulate growth, which included tax relief for small- to medium-sized companies and accelerated infrastructure spending. These helped support faster growth in the second quarter; yet, at 7.4 percent, China’s growth for 2014 was the slowest since 2009. Growth is expected to decrease to 7.1 percent in 2015 as Chinese leadership tries to move its economy to a more sustainable path.
The world market for specialty fabrics grew about 2.6 percent in 2014 and is expected to achieve sales growth of about 2.8 percent in 2015. Constraints on global growth in the 2014 specialty fabrics market were largely attributable to a growth rate of 3.3 percent in worldwide GDP; this was down from its initial projection of 3.7 percent in April 2014.
U.S. fabrics markets overview
All but one of the traditional end product market segments that IFAI monitors regularly achieved single-digit sales growth in 2014. (The military market was down 6 percent in 2014.) Slower growth in the first quarter was due to a harsh winter leading to a shortened selling season for specialty fabric markets like awnings and marine.
Still, marine fabrics top the list of market segments, growing a healthy 7 percent. Investing in state-of-the-art equipment, lean and quality improvement manufacturing practices, training staff and improved marketing efforts targeting the customer have helped many businesses increase sales and profit margins.
Many successful companies in 2014 invested substantial funds into ramping up their logistics/supply chain to find ways to improve the value they provide to their customers, while achieving cost savings. The result has been a savings in transaction costs for their customers. They’ve also experienced an enhancement in customer satisfaction because they’ve drastically reduced the time it takes to complete transactions by cutting down on paperwork and “red tape.”
Growth in the U.S. specialty fabrics industry was about 2.2 percent in 2014. It is expected to be 2.7 percent in 2015. The 2015 growth rate will depend on the continuation of a decreasing unemployment rate, an increase in consumer spending and a more robust GDP in the first quarter. Poor first quarters in 2013 and 2014 dampened consumer demand in the United States and around the world.
Despite improvements in the unemployment rate in 2014, consumers are still cautious about their spending habits. They continue to think about job security and their ability to make ends meet. Nonetheless, an increase in the release of pent-up demand in 2015 is expected, which will result in key economic figures improving.
Marine market outlook
The 2014 U.S./Canadian marine fabric end product market grew 7 percent to 24.9 million square yards. Sales in the marine fabric market should continue to grow 7 to 8 percent in 2015—reaching 26.7 million square yards. Gradual improvement in the U.S. and world economies in 2015 will be the main driver in propelling growth in the marine fabric market. Support for growth will also come from a slow but steady growth in new boat sales, as well as a 2-3 percent sales increase in pre-owned boats and the recover market.
The consumer confidence index, a key barometer for growth in the marine fabric market, was up 13 points in 2014 compared to 2013. In fact, this marks the fourth year in a row it’s been up since IFAI began tracking it. This growth is expected to continue into 2015—as consumer confidence continues its upward climb stemming from a much improved U.S. GDP and an improved job growth landscape.
Leaders in the industry, interviewed at IFAI Expo 2014, said they are optimistic about sales prospects for 2015. They feel the economy is going to be much better, with more job growth and greater consumer confidence resulting in additional consumer spending on specialty fabrics. Many plan to increase their capital expenditures in 2015.
End product manufacturers that focus on more proprietary, high-value products and services should achieve solid growth in 2015. High value-added market segments include safety and protection, geosynthetics, smart fabrics, medical textiles and wide-format digital textile printing.
Increased sales will be garnered by those companies that have regularly invested in resources for developing products, entering new markets, and exploring ways to get closer to the customer, such as improving their logistics supply chains. Both suppliers and EPMs should experience an improved operating environment as some of the obstacle to growth in the recent past begin to ease consumer demand for their products and services increases, and there is some relief from high raw-material costs.
Global demand for OPEC oil in 2015 will be less with its weaker sales growth and the impact of the U.S. shale boom. The United States produced more oil in 2014 than it produced in any year in the previous three decades. Energy pundits expected the first half of 2015 to be weak in terms of oil prices—great news for fabric producers, who can look forward to lower energy prices and a healthy bump in consumer spending in such markets as marine, geosynthetics, truck covers and awnings.
Losing sales to foreign competition may ease a bit with a reduction in fabric imports from China, in particular. Credit is expected to loosen up more in 2015. Industry participants who actively look for opportunities and exploit them will continue to separate themselves from competitors who do not. Successful companies know they must continue to commit to annual investments such as using lean manufacturing practices, developing innovative products and actively marketing to customers and prospects through trade shows, advertising and promotions.
Jeff Rasmussen is IFAI’s market research director. He can be reached firstname.lastname@example.org or +1 651 225 6967.