Inventories Up, Prices Down
James L. Lemons, Ph.D., Technical Editor
If the strong July sales figures reported by major retailers are any indicator, things may improve by the end of this quarter. Heavy discounting and an especially good back-to-school season resulted in same-store sales being up 4.3 percent compared to the same period a year ago. Sales at Wal-Mart, Target, JC Penney, and Sears beat Wall Street analysts’ forecasts.
This strong performance from most retail sectors comes on the heels of improved economic data released by the Commerce Department. Gross domestic product was up 2.4 percent in the second quarter. The Labor Department also released figures indicating that unemployment claims have fallen to a four-month low. Taken collectively, these data seem to suggest the economy may be gathering some momentum and that the worst is over.
The Federal Reserve announced recently it would keep the Federal Funds Rate at 1.0 percent —t he lowest level since July 1958. While the Fed can directly control short-term rates, it can only influence long-term rates. The 10-year Treasury Note has climbed consistently over the last month. Mortgage rates are now at their highest levels in more than a year. Rising rates may deter additional consumer spending and act to derail the fragile economic recovery.
For yarn manufacturers, the economic signs are mixed. The strong retail performance should result in a significant improvement in orders by the end of the third quarter.
In terms of raw materials, polyester prices have been falling, but seem to be stabilizing. Cotton prices are up and may see additional pressure due to exports to China. It is estimated that China’s domestic cotton production can’t meet its demand, and in fact may fall short by as much as 3 million bales. US producers that have supplied cotton to China in the past may see substantial export business as a result of this situation.
Coalition Keeps The Pressure On
The American Textile Manufacturers Institute recently released a report titled, “The China Threat to World Textile and Apparel Trade,” which contends that if the growth of Chinese imports is not restrained, China will control up to 75 percent of the US market once quotas are removed on Jan. 1, 2005.
In response to this threat, the industry has formed a textile/fiber coalition, an alliance of the major trade associations. The coalition has sponsored a number of summits and press conferences to initiate a grassroots public education effort to alert voters to the job threats from China (See “Coalition Seeks To Save Textile Jobs,” www. TextileWorld.com). The message to the Bush administration has taken on additional urgency with the announcement that Pillowtex will cease operations costing roughly 6,400 jobs. The coalition is making it very clear that the Southern vote in the 2004 presidential campaign may hinge on Bush’s efforts to cap textile imports.
The coalition filed petitions with the Committee for the Implementation of Textile Agreements (CITA) for action under the safeguard provisions, which China agreed to as part of the agreement admitting it to the World Trade Organization. Petitions accepted were in the product areas of knit fabrics, cotton and man-made fiber dressing gowns and robes, and cotton and man-made fiber brassieres (See “Washington Outlook,” September 2003, www. TextileWorld.com).
Turnaround Expert Gets Burlington
Turnaround specialist Wilbur L. Ross Jr. was declared the winner of the recent Burlington Industries auction (See “W.L. Ross Delivers Winning Bid To Purchase Burlington,” September 2003, www. TextileWorld.com).
In reviewing his future strategy for Burlington, Ross said, “We don’t buy things to shut them down, we like to build them up.” He is considering the relocation of Burlington’s headquarters from its current Greensboro, N.C., location. Burlington owns the building, but not the 33-acre tract it occupies. Ross indicated he intends to keep Burlington headquartered in Greensboro, but perhaps in a smaller facility due to staff reductions.
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