News Round-up Part I
Dear TextileFuture Readers,
During the holidays there were accruing some important news, and we present to you today and tomorrow, besides of the daily news arrivals, a review on news that arrived during the festive seasons. The first part presents economic important news with facts and figures, some with a textile twist, and published to allow you a follow-up on the important happenings
Where unwanted Christmas gifts get a second life in the USA
Christmas is over and peak selling season is just beginning for Michael Ringelsten.
Ringelsten runs a massive operation outside Chicago in which he buys truckloads of returned merchandise, sorts through the items and rapidly resells most of them over the Internet at bargain-bin prices.
“It is crazy how many returns come in during the two to three months after Christmas,” says the owner of Shorewood Liquidators Inc., a 91-person business that operates two large warehouses packed with returned merchandise from retailers including Amazon.com Inc., Groupon Inc. and Home Depot Inc. To handle the surge in post-holiday returns, Ringelsten, 38 years old, said all of his workers work Saturdays and add an hour to their usual eight-hour daily shifts for two months.
The underbelly of e-commerce is a booming business in which little-known companies collect, process and often resell piles of unwanted gifts, flawed merchandise and other items that shoppers simply regretted buying. This holiday season, goods with an original retail value of USD 19.4 billion – nearly one-quarter of e-commerce sale – are expected to be returned, according to Shorr Packaging, a distributor of packaging to retailers and other businesses.
Return rates can vary widely, but generally between 10% and 15% of all online purchases are returned, though the rate can exceed 30% for certain categories such as apparel, estimates logistics-provider Optoro. A main reason is the increasing use of free-return offers by online retailers.
Total returns for 2015 are expected to be $260.5 billion, or around 8% of all retail sales, according to trade group National Retail Federation. Physical store return rates tend to be lower, at around 7%, according to Optoro.
Large volumes of returned goods do not go back to the retailers that originally sold them, even if the items have not been opened or used. Instead, many are collected at centralized returns centres run by logistics companies and resold in bulk at deep discounts to liquidators and small businesses.
“We call that “re-commerce, where products get a second life,” said Ryan Kelly, a vice president of strategy at Genco, a FedEx Corp. business that handles returns for many U.S. retailers. He says there is strong demand for some categories, such as children’s toys, sporting goods, housewares and consumer electronics. Some businesses will buy entire truckloads of returned goods without first seeing the items, he adds.
Unprocessed returns from retailers are traditionally sold in truckloads, normally between 10 and 100 trucks at a time, fetching between about 10 cents and 20 cents on the dollar, according to Optoro CEO Tobin Moore. Most of those goods end up in pawnshops, dollar stores and flea markets.
But retailers have been trying different strategies to get more bang for their returned buck. Washington, D.C.-based Optoro helps companies resell returned items online and finds other ways to stem losses, which it says can help lift recovery rates to between 40 cents and 70 cents on the dollar.
B-Stock Solutions Inc., a returns-logistic provider, helps retailers including Wal-Mart Stores Inc. and Home Depot sell returns in smaller volumes, typically by the pallet-load. “We transform [them] into bite-size chunks that a much larger audience can digest and that drives the price higher,” says B-Stock Solutions CEO Howard Rosenberg. The pallets are auctioned off on the Internet, and buyers pick up the items directly from the retailers’ warehouses.
When items are disposed of, Groupon recovers a small percentage of their retail value, typically around one-fifth of their original price, though the amount varies by product category. Andrew Bowerman, Groupon’s vice president of logistics, says the retailer’s return rates are broadly in line with the industry. The company has an extended holiday returns period that allows shoppers making purchases between Nov. 1 and Christmas to return items through Jan. 10, versus a usual two-week window for returns.
Ringelsten’s Shorewood Liquidators is a buyer of Groupon’s returns. Back in Shorewood Ill., Ringelsten’s employees sort through returned merchandise from multiple retailers, examining items as varied as ping-pong tables, jewellery, bicycles and vintage auto parts and listing many of them for sale in online auctions on eBay or the company’s own website. He also has people dedicated to packing and shipping out over a thousand packages daily.
Some returns items that Shorewood buys are virtually brand new and can fetch close to half their original retail price. The company also refurbishes and repairs consumer electronics and other products to resell them. Up to 20% of the returns cannot be resold because items are badly damaged or are otherwise unfit for sale, according to Ringelsten.
“To make money in this business it is a volume game. If we can make 10% profit we are jumping up and down,” Ringelsten says. Last year, his company processed a few million returned items for a total retail value exceeding USD 100 million.
The takings can vary widely. In mid-December, Shorewood sold six pairs of Beats Studio headphones for prices ranging from USD 50 to USD 150. It also sold an Everlast exercise machine with “scuffs and scratches” for USD 17. A Radio Flyer tricycle sold for USD 40, more than half of its retail price.
Scott Brooks, a 49-year-old firefighter who lives near Shorewood’s warehouse, is a regular customer. His purchases have included: a returned living room sofa set for USD 300, versus its original USD 1100 retail value, and a returned Citizen watch that retailed for over USD 600 that he paid around USD 150 for in an auction. “The product description said there was a speck or chip in the crystal,” Brooks said, “but I couldn’t see it even when I looked closely.”
WTO Conference in Nairobi produces landmark deal for fairer global trade
The World Trade Organisation (WTO) today has delivered a landmark deal that is good for fairer global trade and good for development at its 10th Ministerial Conference in Nairobi, Kenya
The 10th WTO Ministerial Conference, gathered in Nairobi since Tuesday, agreed today on a global trade deal that benefits developing countries in Africa and around the world by getting rid of trade distorting export subsidies in agriculture. As regards EU producers, they will for the first time see a level playing field in export competition, a key priority for EU negotiators.
After a tough week of negotiations important decisions have been taken to improve rules on agricultural trade. Furthermore, the deal opens up opportunities for the poorest and most vulnerable developing countries to integrate better into the global trading system. The EU team, led by Cecilia Malmström, Commissioner for Trade, and Phil Hogan, Commissioner for Agriculture, was at the forefront of efforts to broker a deal. Ministers also mapped out the future direction for WTO trade negotiations and started a debate on new issues that the WTO should address.
Cecilia Malmström, welcoming the deal, said “We’ve had some long days and nights of intense negotiations here in Nairobi, and our work has paid off. The EU has successfully concluded what we set out to achieve. The WTO, meeting for the first time in Africa, has been able to deliver a good deal for developing countries. Today’s decision opens real opportunities for more trade and investment and reinforces the global trading system. For those who had doubts, it proves the relevance of the WTO and its capacity to deliver results. That’s good news for our work in the years ahead”.
Phil Hogan added that “this is a square deal for EU agriculture, for farmers in the developing world, in particular for the least developed countries. We have delivered on our objectives outlined ahead of the negotiations. In recent years, the EU has led the way in agreeing to renounce the use of export subsidies. Now, for the first time, there are binding disciplines on subsidies such as export credits, where our competitors are subsidising trade worth billions every year. These new binding controls will level the playing field for EU exporters. Also, our competitors will not be able to circumvent these rules through use of state trading enterprises – a key demand for the EU. We have also achieved our objectives on food aid and the special safeguard mechanism. The food aid deal will mean less displacement of local African production, which means it’s good for African farmers and good for the Migration agenda.”
Today’s decisions, building on the agreement reached in Bali two years ago, improves the global environment for trade. In practical terms, today’s deal:
Will stop the use of subsidies and other schemes unfairly supporting agricultural exports. The elimination of export subsidies will protect vulnerable farmers in developing countries from the damaging effects of export subsidies. And it will fast-track the removal of these subsidies in the case of cotton.
Ensures that food aid for developing countries is given in a way which does not distort local markets. Seeks to simplify the conditions that exporters from the poorest countries have to meet, so that their products benefit from trade agreements (so-called rules of origin). It also gives more opportunities for businesses from the poorest countries to provide services in the WTO’s 164 member countries.
These changes will be phased in gradually. More time is allowed to developing and least developed countries to adapt themselves to different aspects of the rules.
For European producers and exporters, the deal brings new opportunities by creating a more level playing field towards both developed and emerging economies. Specifically, it will benefit EU farmers by ensuring an end to export subsidies in key sectors such as wheat flour, sugar and dairy.
The Ministerial also saw the finalisation of the update of the 1996 Information Technology Agreement, which when implemented will remove duties covering EUR 1.2 trillion in trade. Consumers will benefit from the elimination of tariffs and thus more affordable prices on products such as media players, game consoles and GPS.
These two agreements are a shot in the arm for the global trading system. They come on the back of other important multilateral successes with the UN’s 2030 Sustainable Development Goals and last week’s climate change agreement. It provides a firm basis for work in 2016 to further opening multilateral trade opportunities and to broaden and modernise the WTO’s current agenda.
All about the WTO Ministerial Conference by clicking on the first link below.
Chinese central bank is extending trading hours of the Renminbi
In an announcement, the People’s Bank of China said that beginning Jan. 4, the hours for buying and selling the Renminbi on the mainland will be extended to 11:30 p.m. local time, from the current 4:30 p.m. The longer trading hours are in keeping with the government’s efforts to make the Renminbi’s exchange rate more market-oriented and to further open China’s markets to foreign investors, according to the statement
Most of the world’s major currencies trade 24 hours a day and move up and down based on market demand. By comparison, Beijing keeps the Renminbi on a tight leash, with its value largely guided by the central bank and its trading restricted within a band.
In recent years, China has gradually allowed greater flexibility in the Renminbi’s trading. Earlier this month, the Chinese central bank also renewed its pledge to ease the Renminbi’s de facto peg to the dollar and instead measure the Renminbi’s value against a basket of currencies including the dollar, euro, yen and 10 others.
The move to extend the trading hours came after the International Monetary Fund decided in late November to add the Renminbi to its highly selective basket of reserve currencies, which also includes the dollar, euro, yen and the British pound.
Officials at China’s central bank have said the reserve-currency status could lead to greater foreign demand for the Renminbi. Extending the trading hours could help bring in more participants in Renminbi markets, the central bank said Wednesday.
It also said it would permit more foreign investors to trade in the mainland Renminbi market currently dominated by Chinese banks.
Longer trading hours could also help narrow the gap between the onshore Renminbi—the version traded within the mainland—and the Renminbi traded in what is known as Hong Kong’s offshore market, the central bank said.
In recent weeks the Renminbi that is traded in Hong Kong, where it is not subject to any restrictions, has consistently traded below its mainland counterpart as foreign investors expect the currency to depreciate further amid China’s slowing economy.
The discrepancy could lead to speculative trading activities and capital flows, involving investors taking advantage of the Renminbi’s different exchange rates onshore and offshore, according to officials at the central bank.
Even after the Renminbi’s trading hours are extended, the central bank will base the Renminbi’s closing level on its rate against the dollar at 4:30 p.m. local time. The bank uses the closing level to help determine the official rate it sets for the next day.
That is because most of the Renminbi’s trading is still expected to occur during the daytime, the central bank said.
Eurozone manufacturing purchasing manager index tends up
The Eurozone manufacturing purchasing manager index for December 2015 came in at 53.2, well above the 50 mark that separates expansion from contraction, and stood at its highest level since April 2014, index provider Markit reports
The Eurozone PMI rose steadily through 2015, in contrast to declines for similar measures in China and the U.S.
Underneath the headline number were more encouraging details. Italy’s manufacturing PMI reached a near-five-year high at 55.6; new orders picked up across the currency bloc; and manufacturing workforces grew in all eight of the Eurozone countries surveyed by Markit for the first time since August 2007.
The Eurozone’s turbulent recent past means that the manufacturing sector is growing from a weaker position than in other parts of the globe. But it is also being supported by a number of tailwinds: a weaker euro, stimulant policy from the European Central Bank, a slow-but-steady improvement in credit conditions and lower commodity prices. These are providing insulation against the problems being experienced elsewhere.
For markets, the problem is that these supportive factors are well-know, although the recovery in Italy may yet come as surprise to some. Broadly, however, growth in the Eurozone remains sluggish. Europe faces plenty of home-grown political problems for 2016. The bigger economic threats, for now, are external.
Volume of retail trade down in Euro Area but up in EU28
In November 2015 compared with October 2015, the seasonally adjusted volume of retail trade decreased by 0.3 % in the Euro Area (EA19), while it rose by 0.2 % in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In October retail trade fell by 0.2 % in the euro area and remained stable in the EU28.
In November 2015 compared with November 2014 the retail sales index increased by 1.4 % in the euro area and by 2.6 % in the EU28.
The 0.3 % decrease in the volume of retail trade in the euro area in November 2015, compared with October 2015, is due to falls of 0.7 % for automotive fuel, of 0.4% for non-food products and of 0.1 % for “Food, drinks and tobacco”. In the EU28, the 0.2 % increase in the volume of retail trade is due to a rise of 0.4 % for non-food products, while “Food, drinks and tobacco” fell by 0.1 % and automotive fuel by 0.3 %.
Among Member States for which data are available, the highest increases in total retail trade were registered in Romania (+2.6 %), the United Kingdom (+1.8 %) and Poland (+1.6 %), and the largest decreases in Latvia (-3.2 %), Portugal (-1.6 %) and Estonia (-1.5 %).
The 1.4% increase in the volume of retail trade in the euro area in November 2015, compared with November 2014, is due to rises of 1.8 % for both non-food products and automotive fuel and of 0.8 % for “Food, drinks and tobacco”. In the EU28, the 2.6 % increase in retail trade volume is due to rises of 3.4 % for both non-food products and automotive fuel and of 1.2% for “Food, drinks and tobacco”.
Among Member States for which data are available, the highest increases in total retail trade were observed in Romania (+15.0 %), Poland (+5.9 %) and the United Kingdom (+5.4 %), while decreases were observed in Belgium (-2.5 %) and Latvia (-0.7 %).
Euro Area unemployment rate at 10.5% and EU28 at 9.1%
The Euro Area (EA19) seasonally-adjusted unemployment rate was 10.5% in November 2015, down from 10.6% in October 2015, and from 11.5% in November 2014. This is the lowest rate recorded in the Euro Area since October 2011. The EU28 unemployment rate was 9.1% in November 2015, down from 9.2% in October 2015, and from 10.0% in November 2014. This is the lowest rate recorded in the EU28 since July 2009. These figures are published by Eurostat, the statistical office of the European Union.
Eurostat estimates that 22.159 million men and women in the EU28, of whom 16.924 million were in the Euro Area, were unemployed in November 2015. Compared with October 2015, the number of persons unemployed decreased by 179 000 in the EU28 and by 130 000 in the Euro Area. Compared with November 2014, unemployment fell by 2.146 million in the EU28 and by 1.573 million in the Euro Area.
Among the Member States, the lowest unemployment rates in November 2015 were recorded in Germany (4.5 %), the Czech Republic (4.6 %) and Malta (5.1 %), and the highest in Greece (24.6 % in September 2015) and Spain (21.4 %).
Compared with a year ago, the unemployment rate in November 2015 fell in twenty-five Member States, remained stable in Romania and increased in Austria (from 5.6 % to 5.8 %) and Finland (from 9.0 % to 9.4 %). The largest decreases were registered in Spain (from 23.7 % to 21.4 %), Bulgaria (from 10.6 % to 8.8 %) and Italy (from 13.1 % to 11.3 %).
In November 2015, the unemployment rate in the United States was 5.0 %, stable compared to October 2015 and down from 5.8 % in November 2014.
In November 2015, 4.553 million young persons (under 25) were unemployed in the EU28, of whom 3.167 million were in the euro area. Compared with November 2014, youth unemployment decreased by 412000 in the EU28 and by 163000 in the Euro Area. In November 2015, the youth unemployment rate was 20.0 % in the EU28 and 22.5 % in the Euro Area, compared with 21.5 % and 23.2 % respectively in November 2014. In November 2015, the lowest rates were observed in Germany (7.0 %), Denmark (9.9 %) and Austria (10.9 %), and the highest in Greece (49.5 % in September 2015), Spain (47.5 %), Croatia (45.1 % in the third quarter 2015) and Italy (38.1%).
OECD annual inflation slightly up in November 2015
Annual inflation in the OECD area picked up slightly to 0.7 % in November 2015, compared with 0.6 % in October. In the year to November, energy prices fell at a slower pace (by 10.0 %) than in the year to October (by 11.7 %) while annual food price inflation slowed to 1.2% compared with 1.5 % in October. Excluding food and energy, the OECD annual inflation rate was stable at 1.8 % in November
In the year to November 2015, the picture was mixed across major OECD economies. Annual inflation increased in Canada (to 1.4%, up from 1.0%), the United States (to 0.5%, up from 0.2%), the United Kingdom (to 0.1%, up from -0.1%) and Germany (to 0.4%, up from 0.3%). It remained stable in Japan (at 0.3%) and slightly decreased in France (to 0.0%, down from 0.1%) and Italy (to 0.1%, down from 0.3%).
Euro area annual inflation, as measured by the HICP, was stable at 0.1% in November. Excluding food and energy, euro area annual inflation decreased to 0.9%, down from 1.1% in October. Eurostat’s flash estimate for December 2015 points to an annual inflation of 0.2%.
Annual inflation also picked up slightly in the G20 area to 2.7 % in November, up from 2.6% in October. Among non-OECD countries, annual inflation increased in Brazil (to 10.5%), India (to 6.7%), China (to 1.5 %) and South Africa (to 4.8 %). On the other hand, annual inflation decreased in Indonesia (to 4.9%) and the Russian Federation (to 15.0 %) and it declined marginally in Saudi Arabia (to 2.3 %).
U.S. manufacturing with the worst slump since 2009
U.S. factories ended last year mired in their worst slump since 2009, highlighting the global forces set to weigh further on the manufacturing sector into 2016
The Institute for Supply Management, a group of purchasing managers, said on January 4, 2016 that its gauge of manufacturing activity fell to 48.2 last month from 48.6 in November. A reading below 50 indicates the sector is contracting.
December’s figure was the lowest since the end of the recession and marks the first time since 2009 for consecutive months in contraction territory.
“The very strong dollar, weak global growth, low oil prices severely depressing energy sector investment, and excessive inventories continue to weigh heavily on the manufacturing sector,” said Morgan Stanley economist Ted Wieseman.
The global outlook appeared even darker amid the latest indication that China’s manufacturers are struggling further. Caixin Media Co. said Monday that its China manufacturing purchasing managers’ index, a private measure of activity, was at 48.2 in December, the 10th straight month indicating contraction in the sector.
Manufacturing accounts for about 12% of U.S. economic output. Other sectors, fuelled by domestic consumer demand, have appeared more robust. Still, the broader economy has been stuck in slow-growth mode since the latest recession ended 6½ years ago.
That appears unlikely to change. J.P. Morgan Chase downgraded its forecast for fourth-quarter economic output after the ISM report showed manufacturers drawing down inventories and a weaker-than-expected government report on construction spending in the U.S. The bank is expecting gross domestic product to grow only 1 % in the final months of 2015, versus an earlier forecast of 2 %.
The Federal Reserve Bank of Atlanta’s estimate for fourth-quarter GDP fell to 0.7% from 1.3% after incorporating data from January 4, 2016 construction and manufacturing reports, and a trade report released in late December.
The start of 2016 is not expected to be so glum as the weather remains relatively mild, consumers get a boost from lower energy prices and businesses stop running down inventories. J.P. Morgan economist Michael Feroli is predicting 2.25 % growth in the first quarter of 2016.
The manufacturing sector has slumped over the past 12 months and still faces headwinds including falling demand for oil, gas field and mining equipment, weakness overseas and shifting currencies. A strong dollar has curtailed demand for U.S. exports while also making imported goods cheaper.
While the ISM report of January 4, 2016 offered one bright note—a measure of export demand expanded for the first time since April—that was outweighed by contractions for new orders, production and employment.
U.S. added 292000 jobs in December
Nonfarm payrolls increased a seasonally adjusted 292000 in December, the Labour Department said on January 8, 2016. The unemployment rate, obtained through a separate survey, held steady at 5 % last month. The unemployment rate has not been below that mark since 2007
The jobs figures stand “in sharp contrast to the negative economic news emanating from China,” said Beth Ann Bovino, economist at Standard & Poor’s Ratings Services. In the U.S., “people are finding jobs and getting paid more for them.”
Revisions showed employers added 50000 more jobs in October and November than previously estimated. November’s payroll gain of 252000 was revised from an initially reported 211000. October’s gain was recast to 307000 from a previously estimated 298000. The fourth quarter was the best three-month stretch of job creation in 2015.
For all of 2015, the economy added an average of 221000 jobs a month. That’s a slowdown from the 260000 averaged in 2014, but still the second-best year for job creation since 1999.
Meanwhile, wages held nearly steady last month. The average hourly earnings of all private-sector workers fell by 1 cent in December to USD 25.24. But over the past year, average hourly earnings rose 2.5 %, matching the year’s best 12-month gain.
Wage gains were stronger in 2015 than any of the previous five years, but they remain historically modest. The average annual increase for non-managers in the 30 years prior to the start of the most recent recession was nearly 4 %. Wages for production and nonsupervisory workers increased 2.4 % in December from a year earlier. Data for all private-sector workers only dates back to 2009.
Federal Reserve officials will likely view the latest jobs report as a mixed bag. The central bank cited “considerable improvement” in the labour market during 2015 when it acted last month to raise its benchmark interest rate for the first time in nearly a decade. Steady hiring and unemployment supports that view.
However, still-modest wage growth remains a concern. A tighter labour market should lead to better paychecks and ultimately stoke consumer inflation. Without stronger wage gains, it will be difficult for inflation to move back toward the Fed’s 2 % annual target.
“A meaningful pickup in wage growth is still the missing piece of the puzzle in this recovery,” said Paul Ashworth, economist at Capital Economics.
The strong overall payroll growth in 2015 is somewhat out of matching with other measures of the economy.
Economic output in the third quarter advanced 2.1 % from a year earlier, about the same lackluster pace averaged throughout the expansion’s first 6.5 years. The latest readings on manufacturing show that sector is contracting. Falling oil prices and weak global demand are holding consumer inflation at historically low levels.
China Unveils Economic Blueprint for 2016
Chinese leaders approved an economic blueprint for next year that emphasizes tackling long-term problems and reflects a realization that debt and investment can no longer power the world’s second-largest economy.
The plan, laid out at a closed-door conclave of senior party officials led by President Xi Jinping, comes as the country’s massive build-up of debt and legions of factories pumping out unwanted goods astride towers of empty apartments have become severe drags on economic output.
At the annual year-end meeting of China’s top economic mandarins, called the Central Economic Work Conference, senior officials who gathered at the heavily guarded Jingxi Hotel in western Beijing considered prospects that the country’s sluggish growth could linger as the old model has reached its limits, according to a senior Chinese official with direct knowledge of the meeting.
They discussed the potential for a long period of flat or stagnant growth, the official said.
“The economy will follow an L-shaped path, and it won’t be a V-shaped path going forward,” the official said, while ruling out any chances of China launching another round of aggressive stimulus measures like the one initiated in late 2008 to combat the global financial crisis.
Still, worries over a potential hard landing in China’s economy are “unwarranted,” the senior official said.
The official pointed to monetary and fiscal levers Beijing can still pull to help spur growth as well as the leadership’s determination to proceed with reforms that could put the economy on a stronger footing in the long run.
China had about USD 3.438 trillion in foreign exchange reserves as of the end of November.
The plan itself was not publicly disclosed, and state media reports were vague about how the goals would be implemented. But the broad outlines illustrate Beijing’s latest effort to try to rebalance its economy by finding new sources of growth.
Senior leaders at the meeting also looked at tapping into Chinese consumers’ rising demand for safer food, better medical care and other quality-of-life improvements.
We’re not facing a lack of demand,” the official with knowledge of the discussions said. “What we need to do is to carry out supply-side reforms to meet the unmet demand.”
The plan hammered out at the closed-door meeting, which started on Friday and ended Monday morning, nods to a host of chronic problems hindering China’s transformation into an economy driven more by consumption and less by debt and investment.
The plan calls for reducing industrial overcapacity, slashing its stockpile of unsold homes, lowering costs for businesses and mitigating financial risks, according to a communiqué re