By Jim Phillips, Yarn Market Editor
The last three months have been head scratchers for many spinners. The heady business that put the industry on solid footing for the past 18 months has slowed significantly, but – at least not yet – alarmingly.
As one well-placed insider said, “We haven’t come to the stop sign, but the yield signs are making us proceed with caution.” Added another: “It is certainly not that business is bad; it isn’t. It is just different from what it has been. For the past year and more, we’ve looked at quarter to quarter. Then, beginning about June or so, we started looking month to month. Now, it’s week to week. The business is there, but the pipeline isn’t. I know what I am doing next week, but not so sure about the week after. Thankfully, at least so far, it played out well. I am just a little concerned that that there might be a week where that changes.”
So, what is the difference between October and six months ago? By and large, most economic indicators are pretty solid. As of September 30, the unemployment rate in the United States was 5.9 percent — the lowest since 2008, according to the U.S. Bureau of Labor Statistics.
But, despite a relatively stable economy, consumer confidence unexpectedly dropped in September. The Conference Board, a private research group, had expected its monthly Consumer Confidence Index to edge up to 92.8. However, economists were surprised when the figure came in at 86, its lowest reading since May. The Consumer Confidence Index is a survey by the Conference Board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future.
“Despite the expectations of increased confidence, there is one definite red elephant in the room,” said one informed observer. “While fewer people are unemployed, those that are working are not making any more money. Wages are stagnant across the board, and that makes people cautious about discretionary spending. They tend to buy only what they need and hold off on anything that isn’t essential.”
Wages in the United States, according to a US Bureau of Labor statistics data analysis by Bloomberg, reveals that, since 2009, the real value of compensation per hour has increased by only 0.5 percent, the weakest growth since early 1940s.
“When customers aren’t spending a lot of money, our retail customers are very conservative in their orders,” said one yarn broker. “They got stuck a few years ago with a lot of inventory and weak sales. So what we are seeing are smaller programs that are meeting minimum needs. That explains, at least for the moment, why we are seeing steady business, but few large programs.”
Cotton Prices Beginning To Rebound
After falling from more than $2.00 per pound in 2010 to the low $0.60s this year, spot cotton prices seem to be inching back up. For the week ended October 10, spot cotton quotations averaged 236 points higher than the previous week, according to the U.S. Department of Agriculture (USDA). Quotations for the base quality of cotton (color 41, leaf 4, staple 34, mike 35-36 and 43-49, strength 27.0-28.9, uniformity 81.0-81.9) in the seven designated markets measured by the USDA averaged 64.11 cents per pound, up from 61.75 cents the previous week.
Spot transactions totaled 8,094 bales for the week up from 6,214 bales the previous week. The ICE December settlement prices ended the week at 63.94 cents, compared to 61.85 cents the previous week.
October 2014
