Bangladesh's textile and apparel sector faced a rapid reversal in May 2026, with export value dropping 2.3% year-on-year to approximately $4.65 billion after a brief rebound in April, according to data from the Export Promotion Bureau (EPB). This marks a return to negative growth for the country's merchandise exports.
In April, exports had posted a 4.1% year-on-year increase, which was initially interpreted as a sign of demand recovery. However, the rebound proved short-lived. Garment exports, the core category, fell 2.8% year-on-year to about $3.92 billion in May, dragging down the overall figure.
Demand Divergence: European and US Orders Shrink, Emerging Markets Fail to Fill the Gap
By destination, orders from the European Union and the United States both contracted in May. The EU, which accounts for roughly 50% of Bangladesh's garment exports, saw orders drop about 3.5% year-on-year; US orders fell about 4%. Together, these two markets represent over 65% of total garment exports, making monthly export performance highly sensitive to their demand cycles.
Meanwhile, exports to emerging markets such as Japan, China, and India posted modest gains but remain too small in volume—collectively less than 15%—to offset the decline from Europe and the US. This underscores Bangladesh's structural vulnerability: its textile and apparel industry remains heavily dependent on the consumption cycles of Western economies, with little built-in buffer.
Category Concentration: Knitwear Slumps, Woven Garments Hold Up Better
By product category, knitwear exports fell 3.8% year-on-year in May, while woven garment exports dipped only 0.9%. Knitwear accounts for about 55% of Bangladesh's garment exports, and its sharper decline reflects greater sensitivity to price and order lead times. Woven categories, which often serve higher-end brand orders, showed greater resilience.
This divergence offers a direct signal to buyers: in a contracting Western market, woven products, due to stronger order stickiness and lower substitutability, face less downward price pressure than knitwear. For factories relying on fast-turnaround, low-end knit orders, the pressure to cut prices will be more acute.
Industry Transmission: Capacity Utilization Under Pressure, SMEs Hit Hardest
The immediate impact of falling exports is lower capacity utilization. Bangladesh has over 4,500 garment factories, most of which are geared toward European and US orders. The May order decline means some factories may see utilization rates fall below 70%, especially small and medium-sized enterprises (SMEs) dependent on a single buyer, leading to cash flow strain and pressure on wage payments.
Looking at the longer cycle, cumulative exports for the first 11 months of fiscal year 2025–26 (July 2025 to June 2026) stood at about $52 billion, up just 1.2% year-on-year—far below the government's 8% annual target. If June exports do not stage a strong rebound, the full-year growth rate will significantly miss expectations, dampening factory investment and expansion plans and creating a negative feedback loop for upstream yarn and fabric purchases.