Spotlight On 2011
Robert S. Reichard, Economics Editor
It's that time of year when
editors make their annual trek to the crystal ball and try to make some sense of all the
conflicting market forces that continue to buffet the complex domestic textile and apparel
's key conclusion: It's going to be another tolerably good year. One thing is for certain:
The huge market erosion of 2008 and 2009, when textile and apparel activity fell 28 percent and 35
percent, respectively, is over. And while no big rebound is anticipated, most surviving mills and
clothing manufacturers look to remain viable and even to prosper in today's marketplace. On the
demand side, both mill and apparel sales over the new year are expected to equal or even slightly
exceed last year's levels. And a not-too-different scenario is painted for the following few years.
Hardly a glowing outlook, but it's a lot better than what these two industries experienced over the
past decade or so. Nor does supply availability seem to present any problems — even with the rash
of plant shutdowns noted over the past few years. True, there could be some problems with cotton, a
key material input that's now in short supply. But even here, the overall cost impact would seem to
be minimal as labor and other production expenses remain fairly stable. Finally, all this should
trickle down to the bottom line, where some modest gains in both profits and margins are
2011: Another Upbeat Year," this issue).
Gauging Forecast Accuracy
TW is also confident that at year end, the actual 2011 results won't vary much from the above relatively optimistic projections. That's because there's now an impressive list of factors pointing to industry improvement — certainly many more than in previous years. For one, the just-ended holiday season saw consumer purchases exceeding most expectations. And, there's a lot less uncertainty about how the overall economy will fare. In 2010, macroeconomic forecasts were all over the lot, but not this time around. Indeed, almost all forecasters, including TW , look for somewhere near a 2- to 3-percent gross domestic product (GDP) advance this year. Adding to this rosy view is the fact that some 70 percent of economists recently surveyed by the Wall Street Journal say chances are they are underestimating 2011 growth — more than double those feeling their GDP numbers may be a bit too optimistic.
Finally, TW 's own recent track record would seem to inspire confidence in the new predictions. This time last year, for example, TW seriously questioned the gloom-and-doom talk suggesting more stagflation and even further industry declines. And, as it turned out, that view was correct, with overall mill shipments ending up with a solid 7- to 8-percent gain. TW forecasts calling for little or no significant increase in costs were also pretty much on the nose. Ditto, profits, for which the industry managed to rack up solid double-digit gains. Indeed, imports proved the only area in which TW was overly optimistic, seeing a less-than-5-percent increase in coming shipments, while the actual figure was a lot higher.
More Positive Signs
Some additional reassurance for a basically upbeat 2011 outlook comes from several prestigious forecasting organizations. Global Insight's analysts now predict a fractional increase in overall 2011 mill shipments, on top of last year's big gain. Their projections calling for improving industry profits over the new year are equally encouraging. Also suggesting that this past year's pickup was no fluke is the just-released semi-annual forecast by the Institute for Supply Management, a group of the nation's top purchasing executives. Some of their key 2011 projections: increases in mill revenues, prices and capital spending. The latter finding is especially significant, coming on the heels of a similar increase this past year. If nothing else, it suggests industry CEOs' growing confidence about the future. Or, as one pundit suggests, it indicates a willingness on the part of these executives to put their money where their mouths are. Finally, leading industry companies, rather than seeming worried about near-term survival, are now increasingly emphasizing strategies for maintaining or even increasing their competitive positions as world-class suppliers.