201503 CM March

MONTHLY ROUND-UP OF THE LATEST STORIES
IN GLOBAL TRADE BY ANDREA KIRKBY.
NEWS IN BRIEF
CREDIT A LA MODE
THE devil may not wear Prada, but he’s
certainly finding work for idle hands
according to Euler Hermes, which
recently published research on the
German fashion and textiles industry.
While the report talks about Germany,
the trends are pretty much the same
wherever you are.
Fashion is getting faster and faster.
The year doesn't have four seasons
any more – it has up to 12 separate
collections. What’s in this week can
be out by the end of the month. Lead
times are faster, just-in-time stock
management is vital, and obsolescence
comes quicker than it ever did before.
Meanwhile the high street is seeing
tough times as online business booms.
In Germany, online fashion is expected
to grow 50 percent just in the next two
years.
Add to this witches’ brew an industry
that has historically low margins, and
watch out! Customers may not be
as creditworthy as they once were. If
you sell to retailers, you might want
to check out their web presence
and internet strategy, as well as their
balance sheets, before you extend
credit. And whether you’re supplying
retailers, or the textile industry, be
careful you keep fully up to date on
your customers' business, and on your
collections.
COALS TO NEWCASTLE
WOULD you Adam and Eve it, but
we’re actually exporting wine to France!
Les Francais don’t adore Le Piat d’Or
any more, but they’re washing down
the 22,000 tonnes of cheese that we
send them with £48 million worth of
English wine.
We’re exporting beer to Belgium,
too. Some £93 million worth of British
beer, to be precise – an astonishing
success when you think that as recently
as 2010 they were still drinking only £3
million worth of it.
As for Swiss chocolate? They’re
now eating £10 million of ours!
The Institute of Export is quite rightly
proud of these facts. But I think even
better than this is the fact that McVities
has even managed to get the French to
love the digestive biscuit – or rather, 'le
sable anglais’!
SMASHING THE CHINA
THE Chinese regulator just put the
squeeze on margin trading – stock
market trading on credit – and quite a few
commentators predicted the collapse of
the Chinese economy.
The real story is a little more complex.
The Chinese economy is still growing, but
it is also showing some definite signs of
pain as the government tries to slow the
train down without actually pulling the
emergency cord. Growth at seven percent
is still likely to come in well above the US
or the Eurozone – unless the train comes
off the rails completely, of course.
Exporters can still pursue sales growth
in the Chinese market, but they need to
take care with their credit policies. Euler
Hermes has predicted Chinese insolvencies
will rise by five percent in 2015, and says
payment terms are deteriorating and are
now well above the global average, at 90
days against the average 73. A quarter of
payments are overdue, the non-payment
rate has doubled, and China doesn't offer
companies an easy way to pursue bad
debts.
That should tell you to take very good
care of credit-checking prospective
customers. And once you’ve got them,
make sure they are paying their way.
THE END OF THE EURO?
JANUARY saw the election of left-wing
party Syriza as the new government in
Greece on a manifesto composed largely
of anti-austerity promises. Some observers
have predicted a Greek exit from the euro,
others the beginning of more Keynesian
policies across the Eurozone periphery.
In fact it seems unlikely that Greece will
leave the euro. New Prime Minister Tsipras
says it won’t, and with the Greek economy
in better shape than four years ago, a
more limited debt swap proposal looks on
the cards.
But a new Greek government wasn’t
the only change to hit European markets
in January. With the whole of Europe now
either in deflationary mode or close to it,
and growth expectations being cut around
Europe, the European Central Bank has
announced its own version of quantitative
easing, buying €60 billion a month of
Eurozone bonds for at least the next 18
months. It might not quite qualify as a ‘big
bazooka’ but, one economist quipped, it's
certainly ‘a small bazooka’ and should help
put the region back on a growth track.
Currency traders weren’t impressed.
The euro ended up at its lowest levels since
2006. That might be good news if you’re
planning a holiday in Spain or France,
but it's bad news if you export to the
Eurozone – it means your exports are now
less price competitive. Worse, if your major
competitors on global markets are in the
Eurozone, it means they’ll be getting a price
advantage against you in export markets.
While estimates of European growth vary
widely, few observers expect to see the
euro recovering soon. So watch out for euro
denominated exposures, and watch out for
your margins!
30 March 2015 www.cicm.com
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