A Final Look At 2002
Robert S. Reichard, Economics Editor
Equally important is the outlook for holiday sales. Apparel and homefurnishings are moving tolerably well, but only with promotions and some outright price slashing.
Textile World is cautiously optimistic that these markdowns will be effective — aided by such factors as lower interest rates, a new rash of mortgage refinancings, and rising incomes. These same forces were operative last year at this time — and they worked. There’s little to suggest they won’t again.
Upshot: This season’s apparel and homefurnishings sales, while they won’t be spectacular, should manage to rack up a modest 3- to 4-percent overall gain.
Prices Remain A Problem
The raising of textile quotes, however, is another story. The big apparel markdowns alluded to clearly will strengthen garment-maker and retailer resolve to resist the posting of any new fabric increases on the part of the mills. So will today’s deflationary price climate — one in which overall US producer prices continue to lag behind year-ago averages.
Cheap imports — which are again coming in at a near-double-digit clip — are proving to be still another price-boosting inhibitor. Ditto, domestic mill overcapacity — as mill operating rates struggle to remain over the relatively low mid-70s range.
Finally, there’s the cost side of the price equation. Mill profits could certainly use some beefing up, but there’s little to suggest any crisis in their labor and fiber costs that would precipitate any big new cost-price passthroughs.
Price Indices Tell The Story
The combined impact of all the price determinants noted is taking its toll. It helps explain today’s virtually flat patterns in almost every textile area — with only the carpet and rug sector (up 2 percent over the past year) managing to eke out a meaningful advance.
Proof positive of all this easiness comes from TW’s bellwether, all-inclusive Textile Mill Products Price Index. Latest readings show little more than a miniscule 0.5-percent price advance since February. And if you zero in on key greige goods and finished fabric price averages, you find both sectors down 1 to 2 percent from a year ago.
Moreover, given all of today’s domestic and international uncertainties, these key price yardsticks are highly unlikely to post any meaningful increases — at least not over the next few quarters.
Fiber Tags Are Sluggish, Too
There's also been little overall upward movement in fiber prices. True, there have been some small increases and decreases, but for the most part they've balanced each other out.
On the upside, cotton has moved from the low 30s range of last year to the mid-40s currently - mainly on the strength of a somewhat lower crop and the outlook for stronger cotton exports. But that still leaves these tags well under levels prevailing a few years back.
Meantime, man-made fiber tags remain relatively weak - actually running 1.5 percent under a year ago. This man-made fiber easiness should continue as global capacity takes a huge jump in 2002 - rising 24 percent to nearly 73 billion pounds. Cashmere is another shaky fiber these days - with prices now hovering near historic lows.
Some Positive Signs
Before the year becomes history, some of 2002’s encouraging trends should be pointed out. Profits for the industry as a whole are again in the plus column. Cone Mills, a firm hit with losses last year, now reports a solid gain for the recently ended third quarter. Other outfits cite similar results.
Another positive trend: a dramatic drawdown in top-heavy industry inventories. In the mill sector, holdings have dropped an eye-opening 28 percent from year-and-a-half-ago peaks. And in the textile product area, a continuing rise in sales has dropped this sector’s stock/sales ratio significantly — from a near 1.60 months’ supply to only a 1.45 reading currently.
And last but not least, there’s the spate of industry shutdowns, reorganizations and modernizations. When combined with the increasing number of new products, this should pave the way for even more improvement through 2003 and beyond.
Download Current US Textile And Economic Indicators.