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2017: Fashion & Luxury Face A Year of Uncertainty

By Sofia Celeste 02 marzo 2017

MILAN, ITALY – Luxury goods and the small and medium sized firms that support its backbone, are speechless when it comes to making forecasts for 2017.

Everything from terrorism to global warming will impact revenues for the sector this year. Italian industrialists are bullish on the US market and President Donald Trumps plans to slash taxes - a move that will inevitably boost consumer spending.

According ISTAT, Italy’s statistics office which compiles GDP figures, as well as key data on the fashion and textile industry, things are looking good for the national economy. The international outlook for Italian companies overall continues to be defined by the solid growth of the US economy, the decline in international trade and the performance oil prices.

Across the board, organisations like Pitti Immagine and Italy's Chamber of Fashion, as well as the government, have also heeded the call to showcase and bolster promising new brands.

In order to sustain small and medium sized fashion businesses, Italy’s government has pledged to channel 36 million euros, or $38.1 million, in the system this year through the Italian Trade Commission.

Fashion leaders here are hoping for a turnaround in 2017, since the talian economy grew by 0.2 per cent in the fourth quarter of last year, a gain that showed the country has remained resilient in the face of political uncertainty and the ongoing banking crisis. ISTAT said that gross domestic product data showed the eurozone’s third-largest economy grew 0.9 percent in 2016, its best performance since 2010.

According to top luxury analyst Luca Solca of BNP Paribas, three factors that will likely shape the global luxury goods sector this year are: the destiny of the euro and President Donald Trump’s protectionist trade policies.

Tariffs on Eurozone Exports to the US:

“The new US administration calls time on the Eurozone and denounces its currency manipulation to support German exports. Stiffer import duties and tariffs on European products could ensue. This scenario should bring higher prices for luxury goods in the US, as luxury goods companies try to offset the burden of higher import duties. A combination of lower sales volumes and margin pressure would result. LVMH could in part offset the blow through local USA manufacturing,” Solca said.

The US versus China:

President Trump said that the US lost more than one-fourth of its manufacturing jobs since NAFTA was approved, and has seen 60,000 factories close since China joined the World Trade Organisation in 2001. Trump wants to cut down on manufacturing in China to create jobs in the US and raise duties on products coming from the world’s most populous nation.

“The new US administration brands China a currency manipulator and imposes higher import duties and tariffs on its products. China retaliates with tighter controls on American companies in China, as well as higher import duties on American products. This is by far the most negative "dark cloud" scenario for luxury goods, as it would likely puncture the Chinese feel-good factor,” Solca added.

Are we facing the end of the Euro?

Last year, luxury companies prepared themselves for a euro crisis when the Brexit referendum passed, but the Italian banking crisis is also creating market jitters. The breakup of the single devaluation of new currencies might be introduced for economically weaker countries such as France, Italy, Spain and Portugal. Any new currency in Germany and other strong countries, such as the Netherlands and Austria, would be expected to rise in value.

 

 



Sofia Celeste
FAIRPLAY Editor-in-Chief

When she is not hunting down the latest in tech and fashion, Sofia Celeste is scouting artisan talent for her online magazine bacoluxury.com. Born in the US and raised on the Pacific Island of Guam, she went on to write for Dow Jones Newswires and the Wall Street Journal. Her work is now regularly published in top fashion publications NOWFASHION and WWD.

MILAN, ITALY – Luxury goods and the small and medium sized firms that support its backbone, are speechless when it comes to making forecasts for 2017.

Everything from terrorism to global warming will impact revenues for the sector this year. Italian industrialists are bullish on the US market and President Donald Trumps plans to slash taxes - a move that will inevitably boost consumer spending.

According ISTAT, Italy’s statistics office which compiles GDP figures, as well as key data on the fashion and textile industry, things are looking good for the national economy. The international outlook for Italian companies overall continues to be defined by the solid growth of the US economy, the decline in international trade and the performance oil prices.

Across the board, organisations like Pitti Immagine and Italy's Chamber of Fashion, as well as the government, have also heeded the call to showcase and bolster promising new brands.

In order to sustain small and medium sized fashion businesses, Italy’s government has pledged to channel 36 million euros, or $38.1 million, in the system this year through the Italian Trade Commission.

Fashion leaders here are hoping for a turnaround in 2017, since the talian economy grew by 0.2 per cent in the fourth quarter of last year, a gain that showed the country has remained resilient in the face of political uncertainty and the ongoing banking crisis. ISTAT said that gross domestic product data showed the eurozone’s third-largest economy grew 0.9 percent in 2016, its best performance since 2010.

According to top luxury analyst Luca Solca of BNP Paribas, three factors that will likely shape the global luxury goods sector this year are: the destiny of the euro and President Donald Trump’s protectionist trade policies.

Tariffs on Eurozone Exports to the US:

“The new US administration calls time on the Eurozone and denounces its currency manipulation to support German exports. Stiffer import duties and tariffs on European products could ensue. This scenario should bring higher prices for luxury goods in the US, as luxury goods companies try to offset the burden of higher import duties. A combination of lower sales volumes and margin pressure would result. LVMH could in part offset the blow through local USA manufacturing,” Solca said.

The US versus China:

President Trump said that the US lost more than one-fourth of its manufacturing jobs since NAFTA was approved, and has seen 60,000 factories close since China joined the World Trade Organisation in 2001. Trump wants to cut down on manufacturing in China to create jobs in the US and raise duties on products coming from the world’s most populous nation.

“The new US administration brands China a currency manipulator and imposes higher import duties and tariffs on its products. China retaliates with tighter controls on American companies in China, as well as higher import duties on American products. This is by far the most negative "dark cloud" scenario for luxury goods, as it would likely puncture the Chinese feel-good factor,” Solca added.

Are we facing the end of the Euro?

Last year, luxury companies prepared themselves for a euro crisis when the Brexit referendum passed, but the Italian banking crisis is also creating market jitters. The breakup of the single devaluation of new currencies might be introduced for economically weaker countries such as France, Italy, Spain and Portugal. Any new currency in Germany and other strong countries, such as the Netherlands and Austria, would be expected to rise in value.

 

 



Sofia Celeste
FAIRPLAY Editor-in-Chief

When she is not hunting down the latest in tech and fashion, Sofia Celeste is scouting artisan talent for her online magazine bacoluxury.com. Born in the US and raised on the Pacific Island of Guam, she went on to write for Dow Jones Newswires and the Wall Street Journal. Her work is now regularly published in top fashion publications NOWFASHION and WWD.

 

Photo: BULGARI - LVMH

 

Photo: BULGARI - LVMH