The timid signs of recovery recorded in the first months of the year, particularly on the export front, have not been confirmed by figures for the first 6 months of this year. The figures available to date leave very little hope of a turnaround in the second half. In all probability 2004 will go down as another negative year for the shoe industry, and the trend is unlikely to change in 2005.
On the other hand, contrary to other European countries, Italy’s domestic consumption is one of the rare indicators that are not negative. The consumption of Italian households remained more or less stable in the first half of the year, increasing by 0.3 percent in volume and by 3 percent in value, in spite of a relatively tight price policy. In spite of the relatively flat level of demand and production volumes, average prices increased slightly, by 1.6 percent, on the domestic market.
Italian footwear production fell by 4.9 percent in volume in the first half of 2004, year on year. A survey carried out by ANCI, the Italian shoe industry association, on a sample of its members indicates that production was off for 80 percent of Italian shoemakers, while for 38 percent of the survey it was off by over 5 percent. In spite of the moderate price increases, higher costs, linked in part to higher fuel charges, have evidently reduced the companies’ margins.
Statistics for the first 5 months of the year show that Italian footwear exports fell by a further 4.3 percent in volume compared with the same period for the previous year and by 3.6 percent in value. The latter figure reflects the attempts of Italian producers to maintain export volumes by limiting price increases to a minimum. Between Jan.-May 2004 a total of 138 million pairs of footwear were sold abroad – over 6 million less than in the same period the previous year – for a value of €2,629 million.
The decline in exports was particularly strong in the leather footwear sector, the category that provides the highest added value, and the flagship of Italian production. This sector was off by 7.8 percent in volume and 5.2 percent in value. These figures are all the more worrying in that they reflect not so much a loss of competitiveness on the part of the Italian shoemakers but the aggressive policy of their eastern competitors, who no longer hesitate to encroach on the areas in which Italy is specialized.
Exports to certain important European markets were actually up: France and Austria gained 8.1 percent and 15.6 percent respectively, while the Netherlands and Spain had 8.8 percent and 15.2 percent hikes. But Germany and the United Kingdom, which rank respectively 1st and 4th for Italian footwear deliveries, were off by 4.5 percent and 13.8 percent. All the major destinations outside the European Union were also significantly down, particularly North America, where the devaluation of the dollar continues to weigh heavily. Volume deliveries were down by 10.7 percent for the USA and by a massive 119.4 percent for Canada. Russia lost 18.8 percent in volume but increased in value. Total exports to Eastern European countries fell by 22 percent in volume. Volume deliveries to Switzerland fell by10.5 percent and to Japan by 14.4 percent.
Import figures aggravated the overall scenario: in the first 5 months of the year not only did they jump by a further 21 percent in volume, but the average price per pair of imports continued its downward trend - off by a further 19.5 percent – confirmation of the relentlessly growing competitive strength of many of Italy’s rivals, particularly the Asians.
China is Italy’s first footwear supplier, with a total of almost 70 million pairs, up 42 percent in volume compared to a fall of around 15 percent in average price per pair. To mention just two other major suppliers to Italy, India delivered 52 percent more volume, with average prices off by 6.2 percent and Indonesia increased its volume by 40 percent with 20 percent lower prices. Between Jan.-May 2004 a total of158 million pairs of footwear were imported to Italy, 27.4 million more than in the first 5 months of last year, for a value of round €1,035 million. Italy’s trade balance for the footwear sector remains negative in volume, with imports outweighing exports by 20 million pairs. In terms of value, the trade balance fell by 4.3 percent, but was nonetheless positive to the tune of €1,594 million.
The negative state of the industry has also had repercussions on the work force: after an overall decline of 3.5 percent in 2003, the Italian shoe industry lost a further 4.9 percent of its manpower in the first half of 2004, according to ANCI’s survey on a representative sample of its membership.