Inflation in Apparel Producing Countries
Source: EmergingTextiles.com Date: 2008-06-10
Inflation continues rising in apparel producing countries with prospects of higher labor costs ahead. New demonstrations of garment workers were reported in Bangladesh while similar protests may happen in Vietnam after prices soared more than 20% in May. We below compare estimated inflation rates in emerging countries, in order to identify more vulnerable origins.
New strikes and violent demonstrations were again reported in the past days in Bangladesh as garment workers were protesting against the rise in consumer prices.
Clothing worker unions are requesting a significant increase in salaries after food -and more especially rice- prices soared in the past months.
Inflation significantly rose since the start of the year, with a double-digit increase in prices being now reported.
Rice prices doubled in the past year and this may trigger a strong rise in wages in apparel factories.
Vietnam's World Record
A similar situation may be observed in Vietnam where inflation rate is one of the highest in the world, reaching a record 25.2% in May.
A series of strikes were earlier reported in foreign-owned plants, mainly producing shoes and other products. Fears of new strikes are now more evident in the country.
Food prices were up 42.40% from a year earlier with grain prices even surging 67.80%, including rice.
Vietnam's apparel exports continue apparently surging, however, thanks to the fall in China's competitiveness on the lower side of the global apparel sourcing market.
Other Asian countries are confronted with soaring consumer prices and have difficult choices to make in order to protect poorer workers.
Subsidizing Or Not Subsidizing?
A series of countries have preferred heavily subsidizing basic staples, like gas, rice or bread in Egypt.
The cost of such economic policies could rapidly be unbearable, especially with crude oil prices reaching extremely high levels in May.
Indonesia decided to no more subsidize fuel and raised prices by an average 28.7% from the end of last month.
In Malaysia by contrast, authorities did not yet increase gas prices.
Governments are everywhere trying to limit increases in salaries in order to avoid a well-known price/wage spiral which would boost inflation to higher levels.
A solution would consist in only subsidizing products for the poorest citizens while others would have to pay the real market price.
In India, inflation is relatively lower but rising with wholesale prices increasing by 8.1% in the week to May 17th, according to latest official data.
Raising Minimum Salaries
In Thailand, the government significantly raised minimum salaries effective from June.
The rise in wages remains far below inflation rates, however, while the decline in the baht should support exports in the near term.
In Indonesia like in other countries all over the world, higher food prices led to a fall in domestic demand for textiles and apparel, down 27% in the first quarter of 2008. Inflation reached 8.96% in April, up from 7.4% in February and 8.17% in March.
Apparel retail sales were also negatively affected in India.
The table below offers an opportunity to compare inflation trends depending on apparel producing countries.
Prices are faster rising in Vietnam, Sri Lanka or Egypt while Thailand, Philippines and Morocco have relatively lower inflation rates, according to the International Monetary Fund (I.M.F.).
