Positive Trade Signs
Robert S. Reichard, Economics Editor
Other things being equal, this should allow the U.S. to grab a larger percentage of global manufacturing sales, thereby sparking additional gross domestic product growth and consumer spending. Put another way, the overall U.S. export total should expand to the extent that some 2.5 million to 5 million additional jobs could well be created by the end of the decade — enough to drop the currently still-high unemployment rate to below 5 percent.
Coming back closer to the present, textile mill earnings, despite only so-so demand, have remained surprisingly buoyant. Uncle Sam's second quarter 2013 numbers, for example, put the industry's after-tax profits at around $505 million — a significant 31-percent above the comparable level of a year earlier. And it's pretty much the same picture when the last available 12 months are compared to the previous 12 months. The numbers for domestic apparel manufacturers are equally upbeat, with second quarter 2013 results running a solid 14 percent ahead of a year earlier. Equally impressive gains are noted when profits are considered as a percentage of sales. The latest — again, second quarter 2013 — textile mill reading for this so-called margin measure is clocked in at 4.9 percent. That's well above the 3.9-percent reading of second quarter 2012. And the same basic pattern is noted for apparel — a 9.3-percent margin at latest report versus the lower 8.2-percent figure noted a year earlier. And comparable improvement shows up in still another widely monitored margin yardstick — profits per dollar of stockholders' equity. Again, both U.S. industries continue to show improvement, with latest mill and apparel numbers running slightly above year-earlier readings. Still another encouraging note: All the above-noted mill and profit numbers are in marked contrast to the essentially level or even slightly lower readings being reported for "all U.S. manufacturing" over this same period.
The Trend Should Continue
More importantly, there's little to suggest any important change in these industry profit trends over the remainder of the year — and probably well into the future. For one, demand should hold up tolerably well as the economy continues to slowly improve. Also, the import share of the market, while remaining huge, should no longer be increasing. Equally significant, U.S. labor and material costs both look to remain pretty much under control. In any event, the latest quarterly profit projections by Global Insight — another top economic consulting firm — would certainly seem to bear this upbeat outlook. Their analysts, using rough and dirty estimates of profits — shipments less labor and material costs — indicate that this year's earnings for basic textile mills will be up a hefty 75 percent compared to last year's levels. That more than recoups the big profit declines suffered in 2011, when cotton costs went through the roof. Zero in on both more highly fabricated textile product mills — carpets, home furnishings and other such products — and apparel makers, and equally impressive 2013 earnings advances are anticipated. True, Global Insight analysts feel that next year's profit gains should be a lot more modest, running generally in the 2- to 7-percent range. But the key point to emphasize is that the dollar totals will still be edging higher. More importantly, a similar positive earnings pattern is seen for both 2015 and 2016 — a pattern strong enough to assure that U.S. firms will remain world-class producers through the foreseeable future.
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