CLOTHING INDUSTRIES

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34-252-XIE

Manufacturing, Construction and Energy Division

CLOTHING INDUSTRIES

Russell Kowaluk

HIGHLIGHTS 1995

INTRODUCTION

The clothing industry is often referred to as the fashion industry. It is an industry dependent on and nourished by changes in colour, design, and fabric.

Overall the apparel industry ranks in shipment value as 16^th among the 22 manufacturing major groups. Apparel production has always been highly labour-intensive and despite a drop remains the 11^th largest employer among all manufacturing groups. This is a drop from 10^th position last year due to the good performance of Machinery Industries (SIC 31).

INDUSTRY 95 RESULTS

The clothing industries had a very good year in 1995, with the third consecutive annual increase of 5.7% in shipment value reaching $6.5 billion. Major Group 24- Clothing Industries includes a variety of separate industries. The major subgroups are: Women’s Clothing which experienced a 7.7% shipments’ increase; Men’s Clothing, a 5.0% increase; Children’s Clothing, a 1.0% increase and Other Clothing, a 5.2% increase.

The best results were in the Foundation Garment (SIC 2496) Industry with an increase of 14.4% in shipments’ value. This increase was followed by large increases in the Men’s and Boys’ Coat Industry (SIC 2431), with 13.7%; the Occupational Clothing Industry (SIC 2492), with 13%; the Women’s Sportswear Industry (SIC 2442), with 12.5%; and the Sweater Industry (SIC 2491), with 10.6%. The industry that fared the worst was the Glove Industry with a 14.7% decrease in shipments.

Expressed in constant dollars¹, the value of shipments for the Clothing Industries increased by 3.6% in 1995, the third increase since 1989 (using the industrial product price index).

Industries in this major group contributed $3.3 billion in value added to the Canadian economy. Gross Domestic Product (at 1986 prices) for the clothing industries remained at the same level as 1994 at $2.2 billion.

Although the value of shipments increased by 5.7% in 1995, the Clothing Industry Major Group has not kept up with the manufacturing sector. Shipments were almost at their 1989 peak of $6.9 billion while the manufacturing sector as a whole has been recovering since the last recession. The Clothing Major Group with shipments valued at $6.5 billion in 1995, accounts for 1.6% of all Canadian manufacturing activity. The overall apparel industry ranks in shipments’ value as 16^th among the 22 manufacturing major groups. The increase in clothing shipments remains below the 12.4% increase of overall manufacturing industries.

The Monthly Survey of Manufacturers (MSM)² indicates a 2.7% drop in shipments’ values for the apparel group in 1996, while in 1997 to date it reports a 4.8% rise.

EXPORTS AND IMPORTS

The shipments increase can be attributed to a growth in exports due to NAFTA (North American Free Trade Agreement) and favourable exchange rates. This growth compensated for the reduced demand by Canadian consumers.

Exports reached $1.3 billion in 1995, the highest level in fifteen years. Since 1992, exports have climbed steadily, rising from $0.6 billion to more than $1.3 billion in 1995. Representing over 20% of overall production, exports contributed to the increase in shipments. Both in 1995 and 1996, the largest volumes of exports were in the Men’s Suits and Women’s Sportswear Industries (see Chart 2). The men’s sub-group leads the way with exports of $ 497.7 billion. An example of success of Canadian companies is the rise in exports from the Men’s and Boys Suit Industry in the US market.

For the first time since 1991, clothing imports decreased in 1996 by 6% after reaching a fifteen year peak of $3.6 billion in 1995. Canada continued to register a deficit in its international trade balance, with imports of $3.6 billion representing almost three times the value of exports. Clothing has been affected by trade liberalisation; it used to be one of the most trade-protected industries. Imports from low-cost countries benefited from the 1995 Multi-Fibre Arrangement, which began a 10 year phase-out of quotas. The advent of NAFTA and other trade agreements promoted greater trade world-wide. As imports increased, they captured a growing share of the Canadian market, rising from 24% in 1985 to 41% in 1995.

Results from 1996 MSM² show a decrease in shipment value, yet there is a rise in exports of 22% in 1996. It will be interesting to see whether the decrease in imports will translate into Canadian manufacturers receiving a greater share of the market.

DESPITE LOW PRICES CONSUMERS SPEND LESS

In recent years, personal disposable income experienced a slow increase. As a result, personal savings have experienced huge fluctuations with large drops. The jobless recovery has left many consumers worried and reluctant to spend money on new apparel.

While consumers are cutting back on their clothing expenses, the Consumer Price Index has remained flat since 1991. Between 1994 and 1995, the overall IPPI (Industry Product Price Index) for clothing industries experienced a moderate increase of 2% while the IPPI for manufacturing experienced a 8% jump.

Lively competition in the Clothing Industry brought prices down. It is difficult for this industry to deal with a weak demand and strong competition. Costs of raw materials such as leather, polyester and cotton have increased. The price of cotton rose to its highest since the US Civil War in April 1995.

EMPLOYMENT

Despite an increase in shipments, employment is decreasing; the total number of employees fell from over 100,000 in 1990 to less than 80,000 in 1995.

The introduction of new technology, imports and contracting out are reducing the number of employees in the clothing industry. Between 1982 and 1989, the employment level remained relatively stable. Since 1989 the number of employees has gradually fallen.

Employment results from the Survey of Employment, Payroll and Hours (SEPH), and the Labour Force Survey (LFS) reveal a similar trend. The similarity is stronger with SEPH because it also surveys the employers.

Some family or small clothing businesses have grown into corporations. "Technology has permeated every facet of today’s operations, from the receiving dock through the factory to the shipping room and the front office"³. Many establishments have combined new business practices with new equipment. The number of electronic aids such as CAD (Computer-Assisted Design) has increased the standards of operations. Continued annual capital expenditures indicate that the industry expects to sustain its current growth. In recent years capital investment has remained at a high level with 83% of expenditures devoted to new equipment.

Despite investment in new machinery the clothing industry remains highly labour-intensive and is likely to remain so. Over half (51%) of clothing establishments have less than 20 employees and account for 11% of shipments and 7% wages. New technology does not appear to have generated new jobs, since as investment spending rises, the number of employees is declining (see chart 6).

Employees in small plants receive a lower annual income than elsewhere⁴. The Clothing Industry has a high number of small establishments; it also has the smallest hourly rate of all manufacturing industries. Average hourly earnings were $9.16 in 1995, up 2.7% over 1994. Despite that slight increase, this rate remains below the average hourly rate ($16.09) for total manufacturing. Clothing is characterized by a high proportion of female and immigrant workers. 37% are female immigrant workers in the apparel industry compared to 7% in other manufacturing⁵.

This industry has relatively high manpower needs, despite a decline in the number of its employees. With almost 80,000 employees, it is the 11th largest manufacturing employer. Salaries and wages account for 27% of the value of shipments, compared to 16% for Canadian Manufacturing Industries as a whole. In 1995, salaries and wages stood at $1.7 billion, up 1.5% over 1994.

CONCLUSION

Clothing industries in 1995 were operating at 77% of capacity; in recent years they have been operating below the level of Manufacturing Industries as a whole.

While 1995 can be considered as a good year; results for 1996 and 1997 show difficult times for the apparel industry. Financial woes of major retailers could result in cancelled contracts with clothing manufacturers. The effect would be reduced shipments value.

Footnotes

This article has been written by Russell Kowaluk. Russell is a Statistics Canada economist in the Manufacturing, Construction and Energy Division.

Further information on Canadian manufacturing can be found in the publication, Clothing Industries (34-252-XPB). This publication is published annually for $40 per issue in Canada and U.S. $40 outside Canada. To order this publication and other Statistics Canada publications dial 1-800-267-6677, 1-800-889-9734, or by Internet: Order. For information about manufacturing data or time-series call the Disclosure and Dissemination Unit, Manufacturing, Construction and Energy Division at (613) 951-9497 or by Internet: manufact@statcan.gc.ca.