An Increasingly Murky 2003
Robert S. Reichard, Economics Editor
In any event, earlier forecasts calling for 3-percent gross domestic product (GDP) growth this year now seem overly optimistic. Some analysts feel 2 percent would be more realistic, not only for the current quarter but also for the entire second half of 2003.
Other factors giving cause for concern include: a slowdown in wage gains, as companies strive to maintain profit levels in today’s extremely competitive climate; the sluggish job market, which recently dropped one measure of consumer confidence to a nine-year low; the huge jump in energy costs, which now take a much bigger bite out of household paychecks; and rising state taxes and fees. Continuing large stock market losses vis-à-vis last year aren’t calculated to help matters either.
A Few Offsetting Bright Spots
That’s not to say that all textiles are being impacted by the less-than-rosy overall economic outlook. In the fabric area, for example, many specialty offerings — those with unique design, good hand and superior performance characteristics — continue to move quite well. Sporting goods fabrics are also selling at a tolerably brisk pace. Ditto, most fleece lines.
Another overall positive for the industry is today’s relatively low textile pipeline inventories. Key inventory/sales ratios for both textile mill and textile product subgroups are now running far under year-ago levels.
Indeed, in the case of textile mills, the decline has been quite impressive, with the ratio falling from a 1.6-month supply a year ago to under 1.4 months at latest report. Compare the current level to the 1.7-plus reading of late 2001, and the improvement has been even more dramatic, as just-in-time inventory controls become increasingly effective.
A key point to keep in mind here is that the lower this key ratio, the more likely that new incoming textile orders will quickly translate into new textile mill production.
Little Near-Term Improvement Seen
Despite such pockets of strength, there’s precious little to suggest any meaningful industry improvement in the immediate future. That’s certainly been the story over the past few months, when both textile orders and output have remained relatively flat. And all indications point to more flatness over the next few quarters.
Indeed, new textile mill product predictions by Global Insight suggest that shipments in real terms will hold pretty much near current levels for the foreseeable future. The consulting firm sees this flat pattern holding for all major textile subgroups, including broadwoven fabrics, knitting mill products, and even the relatively strong carpet and rug category.
The picture is much the same further downstream, with virtually unchanged apparel demand projected through year end. Prices won’t be improving that much either, with the overall textile industry increase over the current year put at only around 1 percent. Upshot: analysts at Global Insight see no improvement in the textile profit picture into early 2004.
Nor are recent double-digit import gains calculated to make the industry’s problems more manageable. This past year, imports of textiles and apparel products jumped by more than 16 percent on a square meters equivalent (sme) basis. That compares to the near-flat import pattern reported during 2001. And there’s little indication of any appreciable slowdown.
Negotiations to eliminate current textile duties on Western Hemisphere imports within five years will also bear close watching in the months ahead.
The American Textile Manufacturers Institute (ATMI) says it could support the proposal, provided the United States receives reciprocal tariff reductions, and hemisphere exports into the United States are required to use US fabrics when making clothes for our domestic market.
Government spokesmen add the aim is to create a tightly integrated textile industry within the Americas to counter the burgeoning influence of China, where further big inroads are anticipated in 2005, when Uncle Sam’s system of apparel quotas comes to an end.
Trade changes could be in the offing — with significant country-by-country shifts of textile and apparel trade flows all but certain in the years ahead.
Download Current US Textile And Economic Indicators.