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

A Mid-year Appraisal

Robert S. Reichard, Economics Editor

I t's July again — and time for Textile World 's regular semiannual revisiting of its domestic textile and apparel industry outlook. But succinctly, the near-term future doesn't look all that bad considering today's relatively sluggish pace of general economic growth. A recently released forecast by the Institute for Supply Management (ISM) pretty much tells the story. The report — reflecting the grassroot opinions of some of the nation's top purchasing executives — suggests that both textile and apparel firms will rack up overall sales gains for the second year in a row. These same ISM respondents also have some encouraging news on the industry capacity front. They see both textile and apparel companies actually increasing their production potential over the current year. If correct, that would mark a major shift from the significant capacity paring noted over the past few years — the overall declines in capacity since 2001 for these two industries have been 30 percent and 60 percent, respectively. On a somewhat less positive note, however, these same purchasing executives feel that their companies will not be able to pass along a substantial portion of their big 2011 raw material, transportation and other cost increases. To be sure, prices for most fabric and apparel products have been advancing and should continue to advance. But the queried executives feel the increases won't be nearly sufficient to redress the current cost-price imbalance. Barring the unforeseen, this in turn would seem to suggest some modest downward pressure on both earnings and profit margins.


A Closer Look At Profits
This decline for profits and margins is already beginning to show up in official government statistics, which as of TW 's press time, carry only into the first quarter of the year. During that three-month period, after-tax earnings for the overall textile industry dropped more than 20 percent under the comparable year-earlier levels — reversing the solid gains that were reported throughout the previous 12 months. Moreover, while no second quarter numbers are available as yet, all the evidence would seem to point to continuing declines. The big question, of course, is: Just how much longer will this erosion continue? The answer: Probably through the remainder of the year — at least that's what Global Insight, a prestigious economic forecasting firm, is saying. The company's analysts, using their own approximation of industry profits — dollar shipments less the raw material and labor costs that make up the preponderance of textile mill expenses — put the overall slippage at more than 50 percent for both the basic mill and more highly fabricated mill product segments of the industry. These same people see an even sharper earnings drop-off in the apparel sector — probably because of strong consumer resistance to large clothing price increases. Global Insight, for example, expects little more than a 2-percent boost in average apparel tags this year. But profits should turn around again by next year. And by 2013, earnings in all areas — basic mill, fabricated mill products and apparel — could well recoup all the recent declines, with bottom lines again approaching the relatively good levels of this past year.

Behind The Optimism
This improving profit outlook for 2012 and beyond is based on a lot more than just wishful thinking. Factors likely to keep the industry healthy over coming years would have to include: expectations of falling cotton costs; little or no increase in unit labor costs; a slowing down of import gains as overseas costs and prices continue to move up; and tolerably good domestic demand. On the latter score, we now expect textile output to hold at current levels through 2012 — with perhaps some fractional gains when it comes to more highly fabricated mill products. To be sure, apparel and output may edge a bit lower next year. But any decline here will be modest — nowhere near the 20-percent and higher slides of 2007, 2008 and 2009. Finally, a few comments on the really long term — out into the end of the decade: Here again, using Global Insight projections, the picture remains far from gloomy, with average textile mill production shrinkage over this extended period put in the low 1- to 3-percent annual range. Again, that's a lot different from the losses of the past 10 years. And Global Insight's extended forecasts for profits are even more positive. Indeed, mill earnings at the end of the decade are expected to actually be higher than they were in 2010, which was a relatively good year. And clothing manufacturers can expect pretty much the same pattern. In short, the U.S. textile/apparel complex is alive and well.

Related Files:
Click here to view Textile Barometers