No decisions that are likely to affect the improving global economic outlook have been taken in the last two weeks. Though some tensions were noted in the international currency markets, there was no major departure from the trading ranges seen in previous weeks while interest rates remained largely static.

The positive mood that was established by Alan Greenspan some weeks ago continued to flourish, with all the evidence pointing towards a global economic upturn commencing during the second half of the year.

European retail sales and production figures were less encouraging than their US counterparts, however, while most of the recovery so far appears to be taking the form of a replenishment of manufacturing inventory rather than an increase in retail sales. In the UK, sales of leather and footwear were looking better than they have been for some time, though the level of jobs losses suffered by the domestic leather manufacturing sector were plain for all to see in the release of new figures (see leatherbiz.com news stories: March 20 and March 21).

Car sales world-wide remained surprisingly steady with most of the major marques posting good 2001 year-end results while forecasting an equally positive 2002. This was in spite of the fact that global car production declined 4% year-on-year in 2001 - the first decline seen since 1998.

The past two weeks continued the general trend that has been in place for some time, with no major developments to 'frighten the horses' so to speak. If anything, price rises were less pronounced with the general trend of the market being upward - despite moderate corrections in the USA after the previous sharp gains.

In the bovine sector, a stop-go situation prevailed with the goes being slightly stronger than the stops. As a result, the regular pattern of buying and selling could not be discerned. Instead, we had days fevered activity interspersed with days of almost complete quiet - a pattern that usually indicates rising market nervousness.

Probably the strongest market segment remained the car upholstery business. While a significantly reduced slaughter of heavy males resulted in continuing supply bottlenecks for the European tanners, a more confident mood prevailed in the USA and other markets; though even here a seasonally reduced slaughter affected some of the classical hide selections.

The European problems were particularly acute, with various tanners being forced to accept late deliveries and/or smaller quantities than promised. One consequence was the flurry of spot purchasing that was seen to cover eventual production holes. Indeed, having spoken to several major sources of supply over the past week, we formed the impression that most emergency stocks have now been used up and with the Easter holidays coming up, no improvement on the supply side can be expected. Consequently, this part of the market will continue to experience supply difficulties in the coming period, with prices rising accordingly.

Having started this issue of MI with an overview of one segment of the leather market we find it appropriate to continue this vein since more than ever, the industry is fragmenting into different sub-sectors. The situation where one set of circumstances holds true for the whole of the industry clearly no longer applies.

In terms of the shoe leather business, we of course had the major Düsseldorf footwear show (GDS) and here there were few happy faces to be found. Not only were visitors down, but there were also many complaints from both visitors and exhibitors of insufficient orders and a strong resistance to price rises among shoe buyers. There were one or two bright spots, however, with good orders for fashion boot being noted. As with the wider industry, buying activity was sporadic and limited to individual sub-sectors.

In a world where an increasing number of big retailers and manufacturers are opting to negotiate with their suppliers behind closed doors and smaller enterprises are finding it increasingly difficult to attract potential buyers to their stands, it is reasonable to question whether big shows such as GDS can still be relied upon to provide a barometer of business confidence. Given the size of the Düsseldorf show, it is surprising that it has never really taken off as a true fashion event. But to be fair, retail sales in Germany in particular were very poor January and February, so it is likely that some of the quietness was attributable to the timidity of local buyers.

The regularity of sales from the USA to Asia for side leather-related hides served to confirm the rising concentration of shoe production in Asia. This increasingly includes the casual and dress shoe sector and may explain why many European tanners are continuing to find the trading environment so difficult. But while the US business has long since departed to Asia, European manufacturers are looking more towards the new production centres opening up in Eastern Europe.

Turning our attentions to the furniture upholstery tanning business, we are immediately confronted with a set of conflicting viewpoints. While tanners in northern Italy were generally active in their purchasing of quality dairy cows, we were not aware of any serious buying among Asian tanners who generally dominated the market earlier in the year.

However, the interest for heavy weight, good quality cows out of Italy was enough to justify increased asking levels being sought with higher prices being paid throughout the period. But there was still no sign of any upturn in the European furniture retail market and with the seasonal summer downturn almost upon us, those hopes for remain for an improvement in demand from this sector are now being pinned on non-European markets. As if to confirm the fickle nature of the business, and that those tanners who bought at the right prices are not necessarily those who are left holding the orders, there was also a spate of 'tanner to tanner' sales during the period.

Where the garment sector is concerned, it was very much a case of the 'same old, same old' with no shortage of subscribers to the notion that business will improve soon (by May at the latest). On the face of it, looking at the fashion trends, they might well be right - if only they had the courage of their convictions and begun purchasing dairy cows, which are one of the few items which can still be bought at attractive levels. Having said that, we have also heard about unshipped elder contracts at below market levels. This indicates one of two scenarios -either tanners are comfortable with their inventories or they simply don't have the cash to take advantage of the current low prices.

Away from the bovine sector, other markets have been reasonably quiet. Splits continue to be moderately firm with steady demand, but price resistance is enormous. Tanners attempting to obtain higher split credits to compensate for higher hide prices are finding their customers far less co-operative than they hoped. This is especially the case where the European lime split market is concerned and where problems related to the disposal of shoulders and bellies are escalating. With rising temperatures and reduced seasonal demand during the summer months ahead, many in this part of the market are getting jittery about now they are going to get rid of this material in the months to come, meaning the demand for leather related butts doesn't help at all.

In the sheep skin market, mainly Turkish tanneries are continuing to wait desperately for the first offers of New Season lambs suitable for good quality double face production. Since these have yet to make an appearance, the number of interested customers on the books of the main suppliers is increasing all the time and it will be interesting to see at what price level the market opens. There is in addition continued steady demand for moderately priced nappa skins and due to the increased revenues for wool, wool sheep are presently in the focus of attraction.

We are now entering probably in the most important market phase seen for quite some time. Let's compare notes with exactly a year ago when the market was excited and purchases were being driven by security decisions stemming from the European cattle disease situation. Tanners were building security stocks while all the time ignoring the global outlook that was darkening all the time. As a result, by the end May 2001, they found themselves lumbered with high priced overdimensioned raw material stocks and rapidly declining leather demand.

Today, the situation is part different and part the same. While a year ago all tanning businesses acted the same way and supplies were in reality much stronger than many thought they were, today we have a situation where the supply pipeline is being choked with lots of inventory because of poor retail demand.

Until clear signs of improving retail business emerge- particularly in continental Europe - it can be assumed that price resistance will remain at present levels. There is every risk that current hopes for a revival in consumer demand will be dashed before the summer by a lack of cash resources.

Not that we are predicting a crash on the same scale as that which occurred a year ago. Prices simply aren't high enough for that to happen, nor are there the same levels of inventory in the pipeline. So whatever happens we are certainly not in for the same roller coaster ride that we went through last summer. Prices will be contained within a much closer trading range and average at higher levels. As ever, those with the steadiest nerves stand to make the greatest gains.