Workforce reduction looms in wearable exports industy

MANILA, Philippines — The country’s wearable exports industry is experiencing a decline in the number of workers, which may further increase if the global slowdown of consumer demand worsens, according to the Confederation of Wearable Exporters of the Philippines (CONWEP).

In a Viber message, CONWEP executive director Maritess Jocson-Agoncillo said there are currently 9,440 workers among CONWEP members who have been temporarily on forced leave or retrentrenched, covering the apparel, shoes, bags and textile industry.

CONWEP said around around 3.5 percent to four percent of 270,000 workers in the wearables export industry have been affected by temporary closures or partial retrenchment of the workforce.

“It might reach to a maximum range of eight to 10 percent if the current trend extends longer or global demand conditions worsen,”the group said.

In a virtual media briefing yesterday, Agoncillo said that as the global demand for consumer goods continues to slow down, the wearables export sector is expected to get hurt accordingly.

She explained that the group expects temporary closures or partial retrenchment of the workforce in the next few months for some factories whose customers are starting to cut down on their projections.

Agoncillo shared that the United States, being the top export market, reported that its monthly consumer confidence index stood at 96.18 in August 2021.

“This is an indicator that the average US consumer is not confident to spend as they are worried about another possible recession, so they would rather hold back spending in the next 12 months. Note that this is already happening as global giants in Silicon Valley already started cutting down cost,”Agoncillo said.

She stressed that the continuing downturn of the global consumer confidence index (CCI) clearly reveals the softening of the global apparel market as consumers hold back on discretionary spending such as apparel and other consumer goods.

“With global consumer demand slowing down and a looming worldwide recession, brands are taking the cue from the consumer confidence index – goods are not moving as it should out of store shelves,”Agoncillo said.

“It is for this reason customers/brands have to take a conservative posture and cut back on their order projections. Brands/buyers would rather move their existing inventories. This is what the wearables sector is up against, when orders are canceled midstream. Some exporters manufacturers are struggling to maintain full operations and need to lay off workers given fewer orders and operate in lesser capacity required. Affected brands are buying less,”she said.

Agoncillo explained that the uncertainty of the war in East Central Europe, rising fuel cost, the disrupted supply chain, and trepidation of another pandemic directly impacts on consumer behavior across the globe.

“On top of this, global sourcing lynchpins such as labor cost, speed to market, logistics, access to raw materials, production flexibility, and compliance risks are some of the key factors for buyers to deviate portfolios out of the Philippines and into dominant favored ASEAN suppliers such as Vietnam, Cambodia, and Indonesia,” the CONWEP executive director said.

She said the recent wage order hikes further aggravated the competitiveness of the country’s export sector.

“We expect more factories to cope with situations such as order cancellation and deferment of orders so buyers can move current inventories in the coming months.

“Normally, our best season is around June to November period, when our factories are operating in full capacities to complete and deliver the succeeding year spring/summer season orders. We saw it coming, as orders came in trickles from the US, as early as second quarter of 2022.

Meanwhile, Agoncillo stressed the importance of the collaboration between the Philippine government and the industry.

From January to July, the country’s exports of apparel, textile, travel goods and footwear increased by 14 percent to $1.155 billion from $1.009 billion in the same period last year, according to data from the Philippine Statistics Authority.