Karachi, March 19, 2019 (PPI-OT): Textile exports increase by 3% YoY in Feb-2019
Textile exports during Feb-2019 increased by 3% YoY to US$1.09bn compared to US$1.06bn in the same month last year. Cumulatively, textile exports inched up by 1% YoY in 8MFY19.
A 10% YoY drop in yarn exports dulled the positive impact of 11% YoY growth in knitwear exports during the month.
Growth in textile exports during FY19 is expected to remain in low single digits owing to the lagged impact of recent measures by the government.
The recent decision by the Indian government to provide 3.5-4% rebate to its textile sector could exert pressure on Pak textile exports.
Textile exports increase by 3% YoY in Feb-2019
Textile exports, as released by the Pakistan Bureau of Statistics (PBS), increased by 3% YoY during the month of Feb-2019 to US$1.09bn, compared to US$1.06bn in the same month last year. Despite improvement in exports of major sub categories of textile exports, such as knitwear (up 11% YoY), readymade garments (up 6% YoY) and towels (up 8% YoY), lackluster performance in non-value added categories, i.e. yarn (down 10% YoY) and cotton cloth (up 0.4% YoY) pulled down growth in overall textile exports.
Other than higher demand for yarn in the local market, another possible reason for the decline in yarn exports could be pricier local cotton in relation to international cotton (spreads down by ~10% during YTD FY19). A decline in local cotton production (down 7%) amid higher local demand for yarn is one reason for higher local cotton prices. Cumulatively, textile exports crawled up by 1% YoY to US$8.9bn during 8MFY19, as declining yarn exports wiped away growth in value added categories (knitwear, bed-wear and garments).
No major jump expected in textile exports in FY19
Although, textile exports are expected to improve during FY19, growth for the year will most likely remain in low single digits, as effects of the measures being taken by the government (such as lower gas prices for Punjab-based textile exporters) begin to kick in. This is because while exporters’ margins might improve due to the incentives, in order for exports to increase, these companies will need to expand since they are already working on a 24/7 basis to achieve economies of scale in a tough international market.
Other factors that could help push up exports include the govt.’s plan to increase cotton production, promissory notes in lieu of sales tax refunds (which will free up cash needed for expansion) and removal of duties on import of cotton and cotton yarn. At the same time, the recent decision by the Indian govt. to provide 3.5-4% rebate to its textile exporters could exert some pressure on Pak textile exports.