Forecasting The New Year
By Robert S. Reichard, Economics Editor
alling the shots over a 12-month period has never been easy, and this year won't be any
exception. Indeed, the list of question marks and uncertainties engendered by the removal of global
textile quotas has made projecting trends more difficult than ever.
Textile World 's fingers are crossed about the outlook for 2005 (See "Textiles 2005," January 2005, www.TextileWorld.com, ). The basic premise is that today's changing trade ground rules won't have any earth-shaking impact on the textile/apparel industry - at least not over the next few quarters. Upshot: TW is calling for a not-too-bad year - with maybe only fractional losses in overall industry activity. Apparel should show another significant drop - though nothing catastrophic is anticipated. And if you look hard enough, there are even a few bright spots, like carpets and rugs. Other strong areas include automotive fabrics, permeable man-mades (geotextiles) and other niche markets in which international competition plays a relatively minor role.
Behind The Cautious Optimism
The just-ended holiday season would also seem to support this relatively upbeat forecast. So
would the latest report from the Institute for Supply Management, which shows late-2004 gains in
both textile ordering and production. This same group also sees a greater-than-overall
manufacturing performance in 2005 for apparel makers.
Also indicative of a viable domestic industry is the spate of positive forces listed in 2005 - namely, a still-rising economy, an increasingly savvy management, new and improved products, little or no upward cost pressure, continuing productivity gains, and the need to keep some of our production base close to home.
It's probably a combination of these factors that's behind a recent government projection calling for only a small 2-percent annual rate of decline in basic mill production over the current decade - with even some of this offset by fractional gains in the textile product sector.
Meantime, it's tempting to give
a modest pat on the back for pretty much calling this past year's textile trends. Last
January, the forecast called for a bottoming out in the sharp shipment and production declines of
earlier years. And that's exactly what happened. Note that 2004's combined basic mill and mill
product shipment total actually managed to run a bit above 2003 levels. Our crystal ball also
proved quite accurate when it came to other key mill yardsticks. Thus, profits - though still
a long way from being satisfactory when compared to levels of a few years back - really didn't
fall all that much on an overall industry basis.
TW also felt that, given competitive conditions and oversupply, it would be nearly impossible to raise product tags by any significant amount. And again this was borne out by the relatively small 1- to 2-percent overall industry price advance (less than half that of the general economy).
On the other hand, TW went considerably off track in the international trade area — as both import totals and the trade deficit mounted at a faster-than-anticipated pace.
This trade problem remains the big imponderable this year, too. Predictions for 2005 are in part
based on making some progress in leveling the international playing field. This goal could be
achieved in any number of ways including an upward revaluation of the Chinese yuan, continuing
strong US pressure to impose new quotas in sectors seriously threatening the viability of the
domestic industry, Chinese steps to arbitrarily limit exports of certain categories of goods, and
reduced subsidization of China's textile and apparel industries.
On the latter score, China seems to be at least taking a small step with its recent decision to impose modest tariffs on some outgoing textile and apparel shipments. Clearly, this could nudge up prices of the affected products.
Since such duties would be based on the number of items that are exported rather than on their value, the move also could encourage China's mills to move toward higher-priced products. This, in turn, could limit the likelihood of China taking over the lion's share of the world's mass textile and apparel markets.
Download Current US Textile And Economic Indicators.