Encouraging New Numbers
Robert S. Reichard, Economics Editor
A Stronger Economy Helps
This improved mill outlook is in large part predicated on continuing general economic growth. As noted last month, most economists and business analysts now project 3- to 4-percent annual gross domestic product (GDP) growth for 2011 and 2012. And all signs suggest this will be pretty much on target. Rising consumer incomes are now running some 5 percent ahead of a year ago. Then, according to a new Wall Street Journal survey, the jobless rate is expected to drop below 8 percent by sometime next year. Viewed from another perspective, 2.5 million new jobs will be created this year — twice as many as in 2010. One key factor behind this employment optimism: Companies have squeezed as much productivity as possible out of the existing workforce — and they clearly will have to increase hirings to meet rising demand, which, in turn, should help buoy consumer optimism. Another upward GDP impetus should come from the fact that the nation's 500 biggest firms are sitting on $1 trillion in cash. As such, if new plant and equipment is required, U.S. companies will have the wherewithal to make the needed purchases. There are other positive signs, too — namely, falling debt, now at its lowest level in six years; and rising net worth, which, with the help of a stronger stock market, has jumped 5 percent over recent recession lows. Throw all of the above into the computer hopper, and it would seem pretty much to guarantee continuing improvement in domestic textile and apparel activity.
The Import Factor
Shrinking import gains could also help lift domestic industry prospects. Incoming textile and apparel shipments over the past few months have been rising far more slowly than they did last summer and fall. Much of this drop-off is probably due to the hefty new price increases being posted by our major overseas competitor, China — advances sparked by rising labor, material and transportation costs as well as a small jump in the value of the yuan. Clearly, this has resulted in a narrowing China-U.S. price gap — enough to make U.S. buyers take pause before committing for new orders. But another factor also may be playing an import-breaking role — namely the shuttering of many Asian factories during the recent global economic downturn. The resulting supply shrinkages have, in turn, tended to stretch out lead times — making orders placed with these overseas suppliers more iffy for domestic buyers who gear their operations to a tight just-in-time inventory strategy. Reduced foreign capacity also means some large foreign firms are becoming a bit less interested in filling small, less profitable U.S. orders. Not surprisingly, reports now indicate that U.S. suppliers are tending to pick up some of this business. In any event, Textile World's beginning-of-year forecast calling for a significant slowdown in 2011 import gains is beginning to look better and better.
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