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Business & Financial
Robert S. Reichard, Economics Editor

Outlook Not Altogether Bleak

Robert S. Reichard, Economics Editor

C urrent pessimism over industry performance is overexaggerated. To be sure, dollar sales over the recent holiday season were disappointing. In the apparel area, preliminary figures point to only a very small gain vis-à-vis a year earlier. But factor in the 2-percent-or-so drop in apparel tags over the same 12-month period, and unit sales didn’t fare all that badly — probably rising by at least 3 percent.

Hardly nirvana. But it does suggest a viable situation. Indeed, if forecasts of tax relief and 2- to 3-percent annual gains in real income prove correct, overall textile activity could well show some fractional near-term advances over the next few quarters.


Encouraging Trends

In fact, there already are some positive signs. Denim is still going strong, with solid buyer interest in black denim, bleached-out and streaky looks, and khaki tints. Corduroy and twills, while not booming, aren’t doing too badly either. Fleece also is positioned to be a strong seller this year. Ditto, home furnishings, as housing demand continues to run near peak levels.

New, innovative products also are expected to whet consumer appetites. Levi Strauss & Co., for example, will introduce Teflon®-enhanced cotton wovens this spring. And you’ll be hearing more about DuPont’s T-400 elastic fiber, which is beginning to appear in some garments. Then there’s Cargill Dow LLC’s PLA corn-derived fiber — with fabrics expected this year. Also, look for more nonwovens made from cotton.

Statistical Revisions

">Meantime, note some changes in TW’s textile production and capacity utilization figures. The revised data are now based on the new, more realistic North American Industry Classification System (NAICS) that is already being used for such other key textile indicators as manufacturers’ sales, inventories and profits.

NAICS replaces the old Standard Industrial Classification (SIC) breakdown. This switchover is particularly significant for textiles because it is now possible to differentiate between textile mills (NAICS 313) and textile mill products (NAICS 314). Note, however, that TW’s “Textile Barometers” section will continue to combine the two subgroups.

Also worth noting: the revised production index is now being reported on a 1997=100 index base rather than the old 1987=100 base. Since production in 1997 was a bit lighter than in 1987, this means the published index numbers are a few points lower than they previously were.

A Closer Look At The Revisions

Add in the fact that these NAICS figures also incorporate new, more up-to-date benchmark data, and it’s not surprising that some of the industry’s basic trends have changed a bit.

Textile production is now up only 0.5 percent from a year ago — somewhat less than the 2-percent-plus gain suggested last month before the numbers were revised.

The new textile capacity utilization trend also is somewhat lower — now down about 1.5 percent over the past year. This decline (which occurred at a time when production was inching up 0.5 percent) also suggests industry production capacity, rather than remaining stable or declining, actually has risen about 2 percent over the past year.

Implication: the industry, rather than throwing in the towel, actually has been improving its industrial base in an effort to compete in today’s dog-eat-dog marketplace. This trend is also confirmed by the nation’s top textile purchasing executives, who see capital equipment buys up again this year.

Pricing Problems Persist

But more industry production potential means more competition for the buyer’s dollar. Indeed, when combined with still-growing imports, this suggests near-term mill price hikes will be few and far between. Even fabrics that are moving well, such as denim, should find it difficult to pass along meaningful increases.

Still further evidence of today’s tough pricing climate comes from the latest government reports. Average greige fabric quotes, for example, today are no higher than a year ago, despite the fact that some key raw material inputs, such as cotton, are up significantly.

And the picture is pretty much the same for such other textile subgroups as finished fabrics, industrial textile products, and processed yarns and threads. More importantly, given projected market trends, these competitive pricing patterns should persist through spring and probably well into summer.

February 2003

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