Czech Republic

2006: Textile and Clothing Industry Economic Development

Sales, Employment, Wage Trend and Labour Productivity

1) Sales
Based on 2006 results, the sales in current prices in the textile and clothing industry (hereinafter called „the TCI“) have achieved about CZK 54.7 billion, of which approximately CZK 45 billion in the textile sector and CZK 9.7 billion in the clothing industry. This corresponds to the decrease in 3.7 %. in TCI sales in comparison with 2005 results. In this decline the textile industry has not participated, as it has experienced sales increase in 0.7 %. In place of this, sales in the clothing industry have fallen by incredible 20.1 %. This relatively great decrease in sales in the clothing industry (compared with the same period last year) has been distorted by extraordinarily high sales in the 1st semester of 2005.

2) Employment
In late 2006, the employment in the TCI has re a c h e d some 60 thousand jobs level (companies with a number of staff greater than 20 have been included only), which represents a decrease in more than 9.4 % in comparison with late 2005 data. The number of jobs in the textile industry has dropped to the limit of 40 thousand, which means a fall in 7.2 %, if compared with 2005. In the clothing industry the number of jobs has dropped to the limit of 20 thousand employees, and, it corresponds to a decrease in less than 13.6 %.

3) Wage Trend
An average monthly wage in the whole TCI has reached approximately CZK 12,800 level, which represents an increase in 5.4 %, if compared with late 2005. In the textile industry the wage has reached approximately CZK 13,700, which is by some CZK 2,700 more than in the clothing industry.

4) Labour Productivity
The productivity measured by the sales volume per employee (in constant prices) has reached signifi cantly higher values in the textile industry (approximately CZK 1,200 per employee per year) than in the clothing industry (approximately CZK 500 thousand per employee per year). In the textile sector the productivity has risen some 10.1 %, while in the clothing sector it has decreased in 7.9 %.
The total foreign trade balance of the TCI sector in 2006 has achieved a surplus amounting to more than CZK 1.1 billion, which is 1.5 % more than for the same period of 2005. In 2006, textile article exports according to SKP 2 represented about CZK 52 billion, and, textile article imports represented about CZK 49 billion. In 2006, clothing article exports according to SKP 2 represented about CZK 24 billion, and, clothing article imports represented about CZK 25.9 billion.

Overall Assessment
As per above described, textile sector sales in 2006 have done better, if compared with initial estimates. By contrast, clothing sector sales have done worse, if compared with initial estimates. Clothing industry sales index decrease (in -20.1 %) has been given, in particular, by a high 2005 reference level, where it has not been (up to now) possible to explain by anything the amount of sales in the 1st semester of 2005. To 2006 results have decisively mattered the following factors:
- confirmation of stagnation of imports from China, as a result of the Agreement of Understanding adopted by China and the EU in June 2005 (volume of imports to the EU has returned to 2004 level)
- remarkable growth of imports from other Asian countries, in particular, India and Pakistan, which has been, evidently, related to the preceding factor
- both these factors have shown themselves more dramatically in the clothing sector, and, to a lesser extent in the textile sector. As a result, the textile sector has retained exporter‘s position (trade surplus), while the clothing sector has recorded a trade deficit
- Czech companies have gathered a relatively suffi cient number of orders, but the price pressure caused by China in 2005 (although imports did not take place later on) has decreased signifi cantly the economic effi ciency of these orders
- important strengthening of the Czech crown against EUR has lowered, in addition, the economic effi ciency of the sector. This has been partially off set by the same trend in the exchange rate of the Czech crown against USD
- a signifi cant impact on the sector economy has also had the continuously growing cost of power energy and gas (in the whole sector it has got a weight of about 10 % of the total costs). This factor is getting to be a proximate cause of production limitation and stoppage in the CR. It is necessary to realize that the only possibility, how the textile and clothing sectors might off set both a fast rowth and considerable cost items, is to reduce wages (their total amount), as no other item of the calculation formula gives the textile and clothing sectors such a chance
- the above specifi ed factors „have forced“, in particular, the textile sector to carry out additional and important consolidation of productivity measured by sales per employee. An associated eff ect accompanying such a development has been, however, an important reduction in the number of jobs. On the contrary, nor a signifi cant reduction in the number of jobs in the clothing sector (-13.6 %) has prevented from the decrease in its productivity (-7.9 %).

Elaborated by: ATOK

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