Economics of the German shoe industry

17 November 2003

The positive aspects of the German shoe industry during the first half of 2003 were described by Dieter Ruehrschneck, chairman of the Hauptverband der deutschen Schuhindustrie eV (general association of the German shoe industry, registered association) as being overshadowed by an increasing number of negative aspects. 'While I could tell you at the press conference in March that the development of the German shoe industry was more positive than negative in 2002, the situation has taken a slight turn for the worse during the first half year of 2003. This means that positive aspects are being overshadowed. 'The German shoe industry sales have decreased from euro1.62 billion during the first half of 2002 to approximately euro120 million during the first six months of 2003, that is down 7.4% or euro1.5 billion. With this, the trend suggested in the second half-year of 2002 (back then an actual reported sales decline of 5.2%) has continued during the first half- year of 2003. This decline in sales can be categorised as follows: The domestic sales of the German shoe industry decreased by 9.5% down to euro1.04 billion, whereas sales abroad only dropped by 2.2%, now at euro460 million. 'This decrease in sales was accompanied by a significant drop in production. Although there are no definite numbers for the first half-year of 2003, we expect a production loss of slightly more than 12% for this period. This means we are in the same situation as the rest of Europe, although this does not help very much. Correspondingly, the number of businesses dropped by 8.6% from 128 during the first half-year of 2002 down to 117 for the first half-year of 2003. This development is partly due to the fact that subsidiary companies were re- incorporated into parent companies and partly due to actual closings.' He went on to say that restructuring activities are still at hand and the disadvantages of being located in the Federal Republic of Germany are becoming more and more obvious. 'We are also facing new developments in foreign trade. Instead of an increase in export and decrease in import, we have to announce the contrary for the first half-year of 2003. The number of imported pairs of shoes increased by more than 25 million pairs from 179.2 million during the first half-year of 2002 to 204.6 million, a plus of 14.2% pairs imported during the first half-year of 2003. However, because imported shoes have decreased in value by 1% during the same period, there has been a reduction of the average price per imported pair from e11.17 down 13.3% to e9.68. 'The export of German shoes, however, was slow during the first half-year of 2003; the decline of -2.7% down to 38.4 million pairs during the first half-year makes this clear. For a long time we could rely on the foreign trade. The sluggish world economy has weakened the previously strong export. In addition, the valorisation of the euro has weakened the export opportunities of German companies outside Europe. 'Within Europe we have been affected by the recessive economies of our main customers, as well as by the reduction of private consumption in these countries. However, we consider this decline in export during the first half-year of 2003 as temporary. With an increasingly positive development of the world economy, our exports will also increase significantly. German shoes enjoy a good reputation not only within Europe but especially outside of it. The number of orders placed during the months of May to July 2003 justify this modest optimism. A significant increase in order receipts (+11.1%) has already been recorded. 'Let me also just add with respect to the export numbers that, due to the decline of export on a value basis of -4.3 %, a slight drop in the average price per pair has resulted, down 1.7% from e20.08 during the first half-year of 2002 to e19.73 in the first half-year of 2003. Unfortunately, the orders received during the first half-year of 2003 cannot keep the problems of our industrial branch at bay. We have to record declines of about a total of 8-9%. Let me have another word on the development of prices during the first half-year of 2003. According to the statistical numbers now available, the producer's prices have risen by +0.4%, while customers could were able to enjoy shop prices that remained at last year's level. 'It is an interesting fact when looking at the price index of the cost of living, that consumer prices for shoes have decreased from June 2002 until June 2003 by 0.5%. So… this is the naked truth on current situation of our sector. How will it proceed and what do we expect for the total year 2003? I do not think that we can manage to top the sales of 2002. However, we could manage to reach the export level of 2002. A lot depends on whether private consumption in the Federal Republic of Germany (but also in other countries of the European Community) will increase and whether the consumer will put his/her trust in the respective economy. However, all in all, 2003 will definitely not give us any reason to jump for joy. 'Europe on the whole is suffering from an increase in imports. According to the data of the European Office of Statistics now available, imports from non-European countries have increased during the first five months of 2003 by +11%, whereas simultaneously exports to non-European countries decreased by 10%. Most imports came from China (an increase of more than 20%) and Vietnam (+12%). The main customer of the European shoe industry was the USA followed by Switzerland and Russia. 'We can sum up the facts: The European shoe industry is currently suffering from weak and unstable economies. This can be derived by the data. However, I am confident that European shoe industry competence, design and creativity, as well as technical know-how will help us overcome the current period of weakness and spark consumer interest again in fashionable, fitting footwear, thus enabling the European shoe industry to keep its share on the market and enable further expansion. 'The expansion of the EC by ten more countries as of 05/01/2004 is getting closer. We are in favour of this EC expansion, even though we are aware of the negative aspects for the consumption goods sector that could be connected with it. Still, we will face this competition, but we hope that it will be fair and correct and that the federal government and the EC commission will make sure that rules of the game arranged are adhered to.

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