GENEVA — Global yarn production contracted by 3.6 percent in the second quarter of 2003, marking the largest drop seen since 1998, when the textile industry was feeling the hangover of the Asian currency collapse, according to a recently released survey.

Second-quarter production for U.S. yarn spinners was off 9.5 percent.

“The year-long lack of direction in the level of global fabric output is still prevailing,” according to the state of trade report released by the Zurich-based International Textile Manufacturers Federation.

The study also shows that on a regional basis Asian yarn output slipped 3 percent, European declined 1.9 percent, while South American rose 1.7 percent.

ITMF textile economist Greg Fleming in a telephone interview attributed the downward trend to the continued uncertainty in major industrialized economies.

The inventory levels of yarn are also on the high side for this stage of the economic cycle, he noted.

Within Asia, only Pakistan and South Korea reported gains in yarn output, and in the European bloc only Turkey was up, the report said.

Fleming reckons much of the production in developing countries such as Pakistan is being driven up by the anticipation of the end of quotas on textiles and apparel among World Trade Organization nations in 2005.

While U.S. inventories were drawn down by 3.7 percent, other major regions witnessed a buildup in stocks.

Asia led the inventory growth with a year-over-year 21.8 percent increase, because of a 25 percent inventory rise by Pakistan, the ITMF report said.

“There’s strategic production ahead of the liberalization. A lot of it is going into inventories,” Fleming said, adding that he expects the buildup to continue.

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