A Look At Early 2004
Robert S. Reichard, Economics Editor
One hopeful sign comes from a new Institute for Supply Management survey, which shows some edging up in new textile orders, backlogs and production. Just-released government data on mill output confirms this encouraging trend. It shows production beginning to flatten out after the sharp declines of last year - with even some fractional increases from last fall's lows.
Inventories are considerably lower than they were last spring. For primary mills, the bellwether stock/sales ratio is down to a 1.51-months' supply, compared to the 1.62 reading of last May. A similar trend is seen for mill products - 1.68 now versus 1.79 then. If nothing else, these declines suggest incoming orders will increasingly be met from new production rather than inventory drawdowns.
A Stronger Economy Should Help
Today's improving overall business outlook also provides hope for somewhat better days ahead. Virtually all economic analysts now agree that further business gains are a pretty sure thing.
One new Business Week survey of 60 leading economists suggests gross domestic product by year end will be running close to 4 percent ahead of late-2003 levels. This should result in some meaningful employment increases.
Other economic positives these days include still very low interest rates, the absence of inflationary pressures, a buoyant stock market and current tax refunds, which should run as high as 30 percent above those mailed last year.
Consumer confidence is again on the rise - with current readings already considerably above last year's lows. It's a scenario that, other things being equal, will eventually translate into bigger purchases of textiles, apparel and home furnishings.
A New ATMI Appraisal
The American Textile Manufacturers Institute's (ATMI's) recent year-end annual report, while far from upbeat, also seems to confirm that textiles are still a viable industry. True, the new review finds industry employment dropped another 10 percent in 2003. And nearly 200 additional mills were shuttered as Chinese imports continued to flood in.
On the other hand, ATMI also notes a few positives. Textile mill product shipments - carpets, tire cord and industrial products - and textile exports both managed to eke out small gains over the past year. More importantly, with the industry now in stronger hands, combined mill and mill product net profits actually managed to rise a bit - from $400 million in 2002 to $700 million (1.5 percent of sales) in 2003.
Summing up, ATMI President James W. Chesnutt notes that the industry, while in a tough fight, now is organized, energized and united - ready and able to press for an effective and comprehensive trade agreement with China.
A Closer Look At Imports
Such a Far Eastern pact is now virtually a must if the industry is to survive and prosper in today's increasingly free-trade business climate - especially when the time frame is extended to 2005 and beyond. The biggest question mark is what happens to imports next year when all quotas are lifted on Chinese shipments?
Taking off on this, ATMI feels that 650,000 US textile and apparel jobs, along with more than 30 million textile jobs around the world, will be lost if China is not held under some kind of quota control.
Also worrying the industry is the proposed new Central American Free Trade Agreement (CAFTA). Covering Guatemala, Nicaragua, El Salvador and Honduras - and maybe even Costa Rica and the Dominican Republic - this will bear close watching.
In any case, Chesnutt and many other textile executives are calling for its rejection when it comes up for congressional approval. Proponents of the measure, on the other hand, say CAFTA will offer some protection to US mills because Central American clothing manufacturers would have to use fabrics from the region or from a North American Free Trade Agreement country.
Download Current US Textile and Economic Indicators.