Home    Resource Store    Past Issues    Buyers' Guide    Career Center    Subscriptions    Advertising    E-Newsletter    Contact

More Business & Financial

Profits Edge Higher
October 13, 2015

Fiber Costs Move Lower
August 18, 2015

More Thoughts On Imports
June 16, 2015

Healthy Bottom Lines
April 14, 2015

2015 Off To A Fast Start
February 17, 2015

Textile World Photo Galleries
November/December 2015 November/December 2015

View Issue  |

Subscribe Now  |


From Farm To Fabric: The Many Faces Of Cotton - The 74th Plenary Meeting of the International Cotton Advisory Committee (ICAC)
12/06/2015 - 12/11/2015

Capstone Course On Nonwoven Product Development
12/07/2015 - 12/11/2015

2nd Morocco International Home Textiles & Homewares Fair
03/16/2016 - 03/19/2016

- more events -

- submit your event -

Printer Friendly
Full Site
Business & Financial

No Near-Term Pickup

Robert S. Reichard, Economics Editor

A still-sliding economy continues to take its toll on textiles and other major US industries. Especially disturbing: The reluctance on the part of consumers to spend the money they do have. Personal savings (the percent of disposable income not spent), for example, is now running near 5 percent. That's the highest level for this key business indicator in some four years - and a significant shift from just a year or two ago, when a negative savings rate prevailed, with people spending more than they earned. Much of this penny pinching, of course, can be attributed to the huge drop in net worth occasioned by the housing and stock market meltdowns. In any case, consumer spending has slipped significantly - falling at about a 4-percent annual rate since last summer, after more than a quarter century of steady growth. About the only consolation - if you can call it that - is that declines in big-ticket consumer durables like cars, personal computers and TVs have been far more precipitous than those reported by the textile and apparel industries. Year-to-date figures, for example, show auto sales trailing comparable 2008 figures by 40 percent (and by close to 50 percent in the case of Detroit's "Big Three"). That's far more than the modest slippage noted by both apparel and home furnishing retailers. Nor is any dramatic change in this pattern expected anytime soon. Most business analysts see further, though decelerating, gross domestic product (GDP) declines through summer. And the picture seems to be much the same as far as textiles and apparel are concerned.


The Impact On Profits
The above near-term outlook can also be expected to keep industry earnings and margins under downward pressure. Net profit for basic textile products like yarns and fabrics, for example, are projected to show another decline this year - with totals for the year dropping 5 to 6 percent below 2008 levels. And a similar picture is seen for more highly fabricated mill products like carpets and home furnishings, where the earning slippage is put somewhere around the same magnitude. Apparel companies won't escape unscathed either - though the latest estimates here suggest a bit more modest 3-percent drop-off in the industry's 2009 after-tax earnings. In all cases, these declines are larger than those projected as recently as last fall before the extent of the current business meltdown became apparent. On a somewhat rosy note, however, all these textile/apparel subgroups should remain profitable - at least on an overall industry-wide basis. And clearly, there will be no repeat of the negative numbers that were reported as recently as 2000. Also worth noting: These new 2009 profit projections are also a lot better than those being made for many other consumer-oriented durable goods industries. This absence of any really big drop-off in mill and apparel manufacturers profits can probably be attributed to three factors: The above-mentioned more moderate fall-offs in consumer demand; reduced raw materials production costs; and rising worker productivity - which, when combined with only very modest hourly pay raises, has helped keep unit labor costs on a relatively even keel.

A Longer Look Ahead
The really big question mark, however, is what happens next year when things hopefully begin to turn around. Unfortunately, any quick bounceback seems highly unlikely. Right now, most economists and business analysts are betting on only a very modest 1- to 2-percent increase in the nation's GDP for 2010. The problem is that this won' t be nearly sufficient to generate enough purchasing power for any textile and apparel gains. Global Insight, for example, anticipates further domestic sales deterioration for these industries in 2010 - with declines that year put at 3.5 percent, 6.5 percent and 7.5 percent for basic textiles, textile mill products, and apparel, respectively. If any positive spin can be put on these numbers, it's the fact that analysts at this prestigious economic consulting and forecasting firm feel these shipment declines will be far less than the 15-percent-or-so drops anticipated for all three of these categories over the current year. Global Insight's profit forecasts also provide some reassurance of better days ahead. The firm's rough approximation of this key indicator representing sales less labor and material costs should actually begin to move up again next year in the textile sectors. If correct, it would follow four consecutive years of textile earnings shrinkage. Bottom line: The industry, while clearly a lot less smaller than it was a few years back, will still be a major world player as we move into the second decade of the 21st century.

April 14, 2009


Related Files:
Download Current US Textile and Economic Indicators.