Another Look At Demand
By Robert S. Reichard, Economics Editor
ecent Wall Street volatility is raising new questions about consumer spending — on
apparel as well as other products — over the next three to six months.
’s feeling is that fears have been overblown and stock investors have been way too
bearish about the near-term outlook. Reasons: An imposing array of still-strong business
indicators, including the continuing absence of inflationary pressures, Fed statements that
interest rates will remain low, little or no unemployment — almost anybody who has skills can find
a job — and still-rising real or inflation-adjusted pay levels. Add in basically high consumer
confidence, and all the above would seem to suggest that the recent 3- to 4-percent annual rate of
increase in consumer spending will persist.
Moreover, with sales of autos and other big-ticket items slowing down a bit, families should have a little more available for purchases of apparel and related items. And that’s pretty much what seems to be happening. Thus, factory shipments of both basic textiles and more highly fabricated mill products actually rose in January — the latest month for which data are available. Even more encouraging, the Institute of Supply Management’s March 1 report finds new orders for both textiles and apparel inched up. Other things being equal, this grass-roots survey of purchasing executives would seem to suggest the industry’s activity will hold up tolerably well through spring. One final positive note: Textile inventories remain low, making it increasingly likely that any new orders will quickly be translated into new production and shipments. True, when the dust finally settles on 2007, textile activity might still be down a bit. But as of now, TW remains cautiously optimistic, holding onto our beginning-of-year forecast for only about 2-percent overall slippage.
Clearly, this is not the scenario for any significant near-term price advance. Best bet: Spot cotton tags will hold in the upper 40 to lower 50-cents-per-pound range pretty much where they were a year ago. And the picture for wool is pretty much the same, with prices expected to back and fill around current levels. Nor do wage costs seem to be presenting any worries. As pointed out last month, the very modest 2-percent increase in pay rates over the past year have been pretty much offset by still-rising productivity to the extent that unit labor costs remain pretty much unchanged. To be sure, some other costs most notably transportation and overhead have continued to inch ahead. But increases here wont be nearly enough to make for any meaningful increase in overall textile production costs. Finally, add in the fact that textile prices have been steady to slightly firmer over recent months, and earlier fears of an industry-wide cost/price squeeze have all but disappeared.
April 10, 2007
Download Current US Textile & Economic Indicators.