General economic situation and industry development
- Geopolitical uncertainties weigh on global economic growth
- Slowdown of economic growth across all regions
- Premium and luxury goods industry benefits from strong demand from customers in China and emerging markets
General economic situation
According to an estimate by the IMF, growth in the global economy in 2019 was, at 2.9%, 60 basis points lower than anticipated at the beginning of the year and also below the growth achieved in the prior year period (2018: 3.6%). The estimate for global economic growth was revised downwards in view of the increased uncertainties, primarily associated with the trade conflict between the U.S. and China and the uncertainties surrounding Brexit. In particular, sentiment among businesses and private households suffered from these uncertainties, resulting in a slowdown in capital expenditure, exports and consumer spending. In the second half of the year, increased social unrest in some countries were an additional strain on economic growth.
According to the IMF estimate, the economy of the Eurozone grew 1.2% in 2019. This represented a marked slowdown in economic growth compared to the prior year and was also lower than originally expected (2018: 1.9%). Less private consumption, lower industrial production overall, a further slowdown in the Italian economy and the impact of the protracted protests in France mainly contributed to this development. Great Britain recorded economic growth of 1.3%, roughly on par with the prior year level (2018: 1.3%). Concerns about a disorderly Brexit were dispelled over the course of the year, and therefore did not further burden economic growth.
In the United States, economic growth progressed more slowly than initially anticipated. This meant that fiscal policy measures were only partially able to offset tensions between the U.S. and many of its trading partners. The punitive tariffs associated with the trade conflicts placed a particular burden on economic development. As a result, the IMF estimated economic growth in 2019 at 2.3%, below the prior year level (2018: 2.9%).
In China, growth momentum has continued to diminish as expected. The IMF estimated economic growth in 2019 at 6.1%. The growth of the economy was therefore below the prior year level (2018: 6.6%). The more expansive monetary and fiscal policy adopted by the Chinese government partially compensated for the negative effects of the trade conflict with the United States. While the economy of other emerging markets in Asia grew strongly, Japan achieved only low growth, in line with expectations.
In a joint study, The Business of Fashion and consulting firm McKinsey & Company estimate that sales of the global apparel industry increased by 3.5% to 4.5% in 2019 when adjusted for currency effects. Growth was therefore slightly below the prior year level (2018: 4% to 5%). While demand was above average in both the luxury and value segments, the mid-price segment recorded a comparatively lower rate of growth.
For HUGO BOSS, the upper premium segment of the apparel industry is the best benchmark. The Business of Fashion and McKinsey & Company estimate that in 2019, growth of this segment came in slightly below the prior year level at 3% to 4% (2018: 3.25% to 4.25%). Continued high demand for premium and luxury goods, particularly from customers in China and other emerging markets, contributed positively to industry growth. The main beneficiaries were large, financially sound businesses with high innovative capacity.
According to estimates by The Business of Fashion and McKinsey & Company, the apparel industry in the industrialized countries in Europe grew by 1.5% to 2.5% on a currency-adjusted basis, a lower rate than in the prior year (2018: 2% to 3%). Local demand in the industrialized countries in Europe was particularly burdened by general economic uncertainties. This was only partially offset by higher sales from tourists, following the depreciation of the euro against the U.S. dollar and other currencies. Growth remained significantly higher in the region’s emerging markets.
In the Americas, the growth of the apparel industry slowed down slightly in 2019. The Business of Fashion and McKinsey & Company estimate that the industry experienced somewhat slower growth in North America as compared to the prior year, with currency-adjusted growth of 2.5% to 3.5% (2018: 3% to 4%). The U.S. market continued to be highly promotional in 2019, partly due to the increasing strength of the online business. The latter also led to a decline in footfall in shopping centers and a further consolidation of the store networks of many market participants. Tourist business suffered particularly from the trade war with China and the appreciation of the U.S. dollar.
Unchanged to the prior year, growth rates in the apparel industry in Asia varied by region. While the industry in the region’s developed markets was estimated by The Business of Fashion and McKinsey & Company to have grown by 2% to 3% again in 2019 (2018: 2% to 3%), the emerging markets in the region once again recorded currency-adjusted sales growth of 6.5% to 7.5% (2018: 6.5% to 7.5%). The industry benefited particularly from strong customer demand in mainland China. While the market environment in Hong Kong suffered from the political unrest and the associated decline in tourist business, the industry environment in many smaller markets in the region also saw positive development.