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Business & Financial

Forecasting Perils

Robert S. Reichard, Economics Editor

T extile World 's annual trek to the crystal ball can sometimes present problems. More often than not, there are lingering uncertainties. Last year, for example, they were big ones -- embracing such key issues as gauging the extent of the then-beginning business downturn, and what China would do about its undervalued currency and other unfair trade practices. As it turned out, almost everyone, including TW editors, made one big erroneous assumption -- underestimating a recession that resulted in a far-larger-than-anticipated drop in overall business activity. Moreover, it was this economic slide that probably convinced China to halt what had up until then been a slow, upward revaluation of the yuan. Happily, this time around, the questions do not seem quite as challenging. Thus, while there are some differences of opinion among economists, all pretty much agree that forces already in motion will make 2010 a moderately good year. As for China, while Beijing may not do much to level the playing field, neither are there indications it will do anything further to exacerbate things. Throwing all these assumptions into the computer hopper, TW remains confident about its cautiously optimistic 2010 projections. True, in the end, there may still be a few differences between actual and forecast numbers, but they are likely to be minimal - and certainly a lot closer to the mark than they were last year.

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New Upbeat Signs

The news of the past few weeks -- virtually all of which has been positive -- would also seem to add to the feeling that the U.S. textile and apparel industries can breathe a little easier this year. For one, the just-ended holiday season turned out to be considerably better than many had predicted -- and clearly a major improvement over late 2008, when overall consumer purchases slipped about 3 to 4 percent. Another factor calculated to bolster the economy, and hence the textile and apparel industries, is that consumers today are in considerably better financial shape than they were last year at this time. Indeed, American families already have managed to recoup a third or more of the net worth lost from late 2007 to early 2009. Another encouraging sign: More than half -- probably close to 70 percent -- of last year's Washington stimulus package has yet to be committed, with many road-building and construction projects still not underway. And this does not include job-creating moves just now being proposed. Another plus worth noting: Today's upward business momentum is a reliable indicator. If things are looking up today, they are very likely to do so tomorrow and the day after tomorrow. Bottom line: All the above suggests that the recent huge tumbles in textile and apparel activity will soon be little more than an unpleasant memory.

Some Forecast Details

In any event, the new TW projections look a lot better than had been hoped for as recently as this past summer (See " Textiles 2010: A Light At The End Of The Tunnel,"  TW, January/February 2010). Focus on overall textile and apparel demand, for example, and TW expects stable to only fractionally lower numbers for both production and shipments. It's a welcome change from the hefty 20-percent-plus declines racked up during the 12 months ending this past spring. This new pattern is likely to hold for basic textile items like yarns and fabrics, as well as for more highly fabricated products like carpets and home furnishings. Also likely to contribute to a tolerably good year for most mills is the expectation that both key textile inputs -- material and labor -- should remain manageable, with few significant overall cost changes from current levels anticipated. Combine this with the likelihood of stable to fractionally higher prices, and mill profits could even end up with a modest 6- to 8-percent increase. Moving further out into the future, TW editors have also taken a look at 2011 through 2013. Here, too, the picture is far from glum, as the industry continues to consolidate and innovate in today's one-world market. To be sure, any bounceback to anything even approaching the levels of 10 to 15 years ago is out of the question. But, the more-than-a-decade-long period of almost uninterrupted slippage should be over -- pretty much guaranteeing domestic companies will continue to be major players in the global textile and apparel industries through the foreseeable future.

January/February 2010

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