Almost 10 years ago, Priviet Sportive SL was losing business to Chinese suppliers. These days, the Spanish clothes designer is snatching orders back as falling wages at home let it produce garments at a lower cost.
“During the construction boom, women in the villages weren’t interested in earning 700 or 800 euros a month,” said General Manager Daniel Alcazar Barranco.
“Now, people are unemployed, with their backs against the wall. Families need the wages that seemed ridiculous back then.”
The company expects to post 2013 revenue of 15 million euros ($20 million) after sales slumped to almost half that in the late 2000s.
Customers such as El Corte Ingles, Spain’s largest retailer, are among department chains turning back to domestic suppliers to avoid China’s longer delivery times and rising labor costs. Automakers too are expanding in Spain as wage costs fell in 2012 for the first time in three years.
Spain’s allure suggests new growth drivers are helping the euro region’s fourth-largest economy overcome a downturn, less than two years after the debt crisis raised questions about whether it could stay in the euro.
It’s on the leading edge of a move toward competitiveness in such other hard-hit countries as Greece and Portugal, which also are narrowing the cost gap with China.
The euro was little changed at $1.3662 at 11 a.m. in Madrid having climbed 0.6 percent last week. The Stoxx Europe 600 Index rose 0.3 percent to 330.90.
Local Production
Unit labor costs in Spain fell for a fourth year in 2013, according to the Organization for Economic Cooperation and Development in Paris.
That has contributed to a 10 percent decline in households’ average income since 2008, while exports surged to a record last year amid signs demand is stabilizing.
“It really comes down to the economics of production,” said Richard Perks, a retail analyst at Mintel Group Ltd. in London.
“It’s now less disadvantageous to produce locally and worth the premium to be able to react quickly.” Spaniards are willing to accept lower pay as competition for jobs has increased. About 27 percent of the workforce is unemployed, more than three times the pre-crisis rate.
At the same time, households have experienced the deepest austerity measures in the nation’s democratic history, from income and value-added tax increases to public sector wage cuts.
Sewing Less
“Companies have become much more demanding and new hires are paid less, especially for jobs that require low or medium qualifications,” said Lorenzo Rivares, a spokesman for Asempleo, the association of job-placement companies.
“It used to be difficult to find people for contracts shorter than three months. Now plenty of temporary workers sign up for weeks.”Manufacturers say their best chance to compete is on middle- or higher-end products, while the lower-value range is lost forever.
Tailoring currently employs about 54,000 people in Spain, half as much as in 2008 and less than one-third of what it was in the early 2000s.
Priviet Sportive’s Alcazar agrees the Madrid-based company will continue sourcing in Portugal, Bulgaria and Morocco, as well as in Spain. His contractors and others are finding it easier to retain skilled seamstresses at home.
Maria Vazquez, who has run a workshop for about 15 years in Carballo in the state of Galicia, says it was hard to find qualified workers before the crisis.
“Now, they come knocking at the door,” said Vazquez, 45. “We see women who have more experience and have been out of work for years.”
Job Security
That’s partly because Spaniards are less secure in their jobs. Prime Minister Mariano Rajoy’s 2012 labor law overhaul made it easier and cheaper for companies to fire workers or reduce wages.
Employers’ average net yearly cost per worker fell that year for the first time since at least 2001, by 0.7 percent, according to the National Statistics Institute. Beyond the textile industry, cheaper outlays are helping industries such as carmaking contribute to an export-led recovery.
Ford Motor Co. (F) plans to make new models at its Almussafes plant near Valencia, eastern Spain. PSA Peugeot Citroen (UG) said it’ll manufacture a compact minivan at a General Motors Co. (GM) Iberian factory while closing a French facility.
“Spain is in the process of regaining competitiveness lost during its crazy expansion years,” said Madrid-based Angel Laborda, a former head of government forecasting who is now chief economist at Funcas, the savings banks’ foundation.
“Other European countries, such as Greece, Italy and Portugal, are undergoing a similar correction of imbalances.”
Local Sourcing
In 2014, the OECD forecasts unit labor costs will fall by 1.3 percent in Spain, 0.2 percent in Ireland and 5.9 percent in Greece.
That compares with increases of 1.6 percent in Germany, 1.2 percent in France and 1.3 percent in the U.K. Last year, higher costs in China prompted Canary Islands-based Burmen SL to take out machinery stored 10 years earlier and restart manufacturing its Lenita brand swimsuits locally.
This year, it plans to add its sportswear and lingerie products, currently made in continental Spain, Portugal and Turkey.
Manufacturers in all three countries, as well as Eastern Europe and Italy, are benefiting from the cost declines, said Bryan Roberts, an analyst at Kantar Retail in London. That’s not true in the richest economies, where costs are higher, he said.
“It’s not just a Europe versus Asia issue, it’s also an intra-European one,” Roberts said. “Eastern and southern Europe are net textile exporters to north and western European retail businesses because they offer a big cost advantage as well as reducing the risks of a huge global supply chain.”
bloomberg.com
“During the construction boom, women in the villages weren’t interested in earning 700 or 800 euros a month,” said General Manager Daniel Alcazar Barranco.
“Now, people are unemployed, with their backs against the wall. Families need the wages that seemed ridiculous back then.”
The company expects to post 2013 revenue of 15 million euros ($20 million) after sales slumped to almost half that in the late 2000s.
Customers such as El Corte Ingles, Spain’s largest retailer, are among department chains turning back to domestic suppliers to avoid China’s longer delivery times and rising labor costs. Automakers too are expanding in Spain as wage costs fell in 2012 for the first time in three years.
Spain’s allure suggests new growth drivers are helping the euro region’s fourth-largest economy overcome a downturn, less than two years after the debt crisis raised questions about whether it could stay in the euro.
It’s on the leading edge of a move toward competitiveness in such other hard-hit countries as Greece and Portugal, which also are narrowing the cost gap with China.
The euro was little changed at $1.3662 at 11 a.m. in Madrid having climbed 0.6 percent last week. The Stoxx Europe 600 Index rose 0.3 percent to 330.90.
Local Production
Unit labor costs in Spain fell for a fourth year in 2013, according to the Organization for Economic Cooperation and Development in Paris.
That has contributed to a 10 percent decline in households’ average income since 2008, while exports surged to a record last year amid signs demand is stabilizing.
“It really comes down to the economics of production,” said Richard Perks, a retail analyst at Mintel Group Ltd. in London.
“It’s now less disadvantageous to produce locally and worth the premium to be able to react quickly.” Spaniards are willing to accept lower pay as competition for jobs has increased. About 27 percent of the workforce is unemployed, more than three times the pre-crisis rate.
At the same time, households have experienced the deepest austerity measures in the nation’s democratic history, from income and value-added tax increases to public sector wage cuts.
Sewing Less
“Companies have become much more demanding and new hires are paid less, especially for jobs that require low or medium qualifications,” said Lorenzo Rivares, a spokesman for Asempleo, the association of job-placement companies.
“It used to be difficult to find people for contracts shorter than three months. Now plenty of temporary workers sign up for weeks.”Manufacturers say their best chance to compete is on middle- or higher-end products, while the lower-value range is lost forever.
Tailoring currently employs about 54,000 people in Spain, half as much as in 2008 and less than one-third of what it was in the early 2000s.
Priviet Sportive’s Alcazar agrees the Madrid-based company will continue sourcing in Portugal, Bulgaria and Morocco, as well as in Spain. His contractors and others are finding it easier to retain skilled seamstresses at home.
Maria Vazquez, who has run a workshop for about 15 years in Carballo in the state of Galicia, says it was hard to find qualified workers before the crisis.
“Now, they come knocking at the door,” said Vazquez, 45. “We see women who have more experience and have been out of work for years.”
Job Security
That’s partly because Spaniards are less secure in their jobs. Prime Minister Mariano Rajoy’s 2012 labor law overhaul made it easier and cheaper for companies to fire workers or reduce wages.
Employers’ average net yearly cost per worker fell that year for the first time since at least 2001, by 0.7 percent, according to the National Statistics Institute. Beyond the textile industry, cheaper outlays are helping industries such as carmaking contribute to an export-led recovery.
Ford Motor Co. (F) plans to make new models at its Almussafes plant near Valencia, eastern Spain. PSA Peugeot Citroen (UG) said it’ll manufacture a compact minivan at a General Motors Co. (GM) Iberian factory while closing a French facility.
“Spain is in the process of regaining competitiveness lost during its crazy expansion years,” said Madrid-based Angel Laborda, a former head of government forecasting who is now chief economist at Funcas, the savings banks’ foundation.
“Other European countries, such as Greece, Italy and Portugal, are undergoing a similar correction of imbalances.”
Local Sourcing
In 2014, the OECD forecasts unit labor costs will fall by 1.3 percent in Spain, 0.2 percent in Ireland and 5.9 percent in Greece.
That compares with increases of 1.6 percent in Germany, 1.2 percent in France and 1.3 percent in the U.K. Last year, higher costs in China prompted Canary Islands-based Burmen SL to take out machinery stored 10 years earlier and restart manufacturing its Lenita brand swimsuits locally.
This year, it plans to add its sportswear and lingerie products, currently made in continental Spain, Portugal and Turkey.
Manufacturers in all three countries, as well as Eastern Europe and Italy, are benefiting from the cost declines, said Bryan Roberts, an analyst at Kantar Retail in London. That’s not true in the richest economies, where costs are higher, he said.
“It’s not just a Europe versus Asia issue, it’s also an intra-European one,” Roberts said. “Eastern and southern Europe are net textile exporters to north and western European retail businesses because they offer a big cost advantage as well as reducing the risks of a huge global supply chain.”
bloomberg.com
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