A Not-Too-Bad Early 2007
By Robert S. Reichard, Economics Editor
F inal January-April textile statistics are providing a bit of cheer to industry executives. For one, mill production has remained pretty much unchanged from end-of-2006 levels. And while four months do not necessarily indicate a trend, the new numbers would clearly seem to suggest an improvement over the last six months of 2006 when overall mill output dropped about 5 percent. Moreover, this newly noted leveling off is confirmed by Uncle Sam’s textile shipment numbers, which show early 2007 averages running only about 1 percent under last December’s levels.
Equally encouraging is the fact that virtually all of this new output seems to be going into consumption rather than inventory. Backing this up, mill inventory/sales ratios have for the most part remained at relatively low unchanged levels. To be sure, some decline in overall mill activity still seems inevitable for the year as a whole. But given the relatively encouraging 2007 start, TW is becoming increasingly confident that the beginning-of-the-year forecast (See “Textiles 2007: Another Reasonably Good Year,” TW, January/February 2007) will hold up. Recall at that time TW called for only a small 1 to 2 percent decline in aggregate mill shipments. And that’s still our expectation. All the above would also seem to bode well for early 2007 profit figures, which are just now coming out. But one word of caution: Not all mill segments will fare equally well. And again, harking back to our earlier predictions, TW feels the more highly fabricated sectors of the industry will fare better than basic textiles — mainly yarns and fabrics.
True, imported merchandise accounts for much of this gain. Nevertheless, this key number does suggest a basically still-strong demand for textile and apparel products. Another bullish macro-economic sign: All-industry factory production also looks to be on the rise again. Thus, the Institute of Supply Management — a grassroots purchasing executive trade group — notes that as of last report, its index of industrial activity rose to its highest level in nearly a year.
Indeed, despite continuing mill shutdowns, this strong capital spending has held the drop in overall US textile mill capacity to only around 2 percent this past year. That’s not all that bad considering all the recent negative forecasts about domestic mill shrinkage in today’s increasingly competitive one-world market. Nor was the past year an anomaly in this respect. According to recent National Council of Textile Organizations estimates, domestic mills have invested upwards of $3 billion a year in new plant and equipment over the past decade. All told, this had enabled the industry to boost productivity a hefty 51 percent over the past decade. That’s the equivalent of an impressive 4.25-percent annual rate of advance — putting textiles second among all industrial sectors in output-per-worker advances.
June 5, 2007
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