Another Negative Quarter
Robert S. Reichard, Economics Editor
Nor is it likely that the next few quarters will see any appreciable textile turnaround. True, all the fiscal and financial aid being funneled into the economy by Washington should have some positive effect. But it will all take time, especially with consumer confidence still near an all-time low. While making any pinpoint predictions under these conditions is risky, Textile World editors feel that general business activity will continue to decline, though hopefully at a less precipitous pace. And again, this will be having a negative effect on textile and apparel. TW ’s best bet: another 3- to 5-percent slippage in textile production and shipments through next June. After that, if all goes well, a more significant industry bottoming-out could be in the cards. But to achieve this, US officials will also have to keep a sharp eye on imports — especially from China, where fears of a similar-to-US downturn has halted an further upward revaluation of the nation’s currency — the yuan — and resulted in increased Beijing rebates on taxes charged to their textile, apparel and other exporters. More importantly, Washington’s top priority has to be put on effecting extensions on still-existing Chinese export curbs — caps that are targeted to expire at the end of the current year. One hopeful sign: The incoming Obama administration has been hinting it might be somewhat more willing to protect US industries. So has the new Congress, many members of which were selected on the promise to further level the still badly distorted international trade playing field.
A Few Other Positives
There’s also a modicum of additional good news to balance out all of today’s gloom and doom. For one, despite all the recent declines, the US textile and apparel industries are still managing to turn a profit. True, earnings and margins are down when compared to last year — but not any more than many other key US industries. Indeed, our mills seem to be faring a lot better than some other hard-hit sectors like autos and big-ticket appliance lines. Credit here has to go to increasingly savvy textile/apparel management personnel. They’ve helped avoid a major crisis by forging new global alliances, coming up with continuing new and improved products, reacting quickly to changes in consumer tastes, and last, but not least, cutting costs. This improving cost performance has also been aided by the recent tumble in cotton prices — from a peak of near 80 cents per pound earlier this year to only around 40 cents per pound at latest report. Much of this fiber drop can be traced to the worldwide economic crisis. But basic supply/demand forces are also playing a role. More to the point: Global consumption this year, according to Cotton Incorporated estimates, could actually show a fractional decline — enough to keep overall supplies, as measured by the stock/use ratio, at relatively high levels. And there’s even some hope for lower costs in the other major fiber sector — man-mades. True, quotes here are still running considerably above a year ago. But this, too, should change on a combination of slower demand, excess capacity, and sharply reduced petroleum-based feedstock costs engendered by the recent huge declines in crude oil tags.
December 9, 2008
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