According to a report on G-20 nations compiled by the International Monetary Fund, the global economic recovery is stronger than anticipated thanks to stronger growth in such markets.

Of particular note were growing middle classes in nations such as China and India, and the potential they present especially for high end apparel.

As a result, overall world output is projected to expand by 3.9% in 2010, up by nearly 1 % on projections made last October.

China’s robust economy is to growth by 10%, India by 7.7%, Indonesia by 5.5%, and Brazil by 4.7%, estimates the IMF study, prepared for a meeting of G-20 deputy finance ministers held in Seoul, Korea.

 
However, output in advanced economies is expected to increase by only 2.1%, which makes for a sluggish recovery, with the US expanding by 2.7% and the Euro area nations by a weak 1%.

 
Contraction in demand for day-to-day apparel has been less affected by the global downturn compared with other consumer segments like the auto sector which has experienced sharp downfalls in demand, say analysts.

But the sluggish recovery is expected to affect the upper end of the apparel market in rich economies.

“Weak household balance sheets are expected to remain a drag on private demand. Credit will be held back by the need to repair bank balance sheets,” the report notes and adds this is likely to impede access to credit for SMEs, which have less access to capital markets and consumers.

 
Concerning exchange rates, the IMF estimates the dollar is still "somewhat overvalued", the Chinese renminbi has depreciated in real effective terms in tandem with the dollar and is estimated to be "substantially undervalued", and the recent real depreciation of the Euro has moved it towards its "fundamental value".

 
The volatility of the dollar and the continued uncertainty over the future path of the now widely perceived under-valued Chinese currency tends to affect more smaller textiles and apparel exporters and importers than bigger entities that have the personnel and resources to hedge against any sudden movements in the currency markets.

 
Therefore, while the stronger Chinese currency would stimulate more imports, including apparel, a lower dollar would act as a dampener of US import demand.