Business & Financial: A Long Look Ahead

By Robert S. Reichard, Economics Editor

The U.S. textile and apparel industries — even after factoring in continuing foreign competition — are looking increasingly healthy — not only for the next year or two but also over the really long pull. That’s the consensus of a growing number of studies that essentially mirror Textile World’s own upbeat outlook. To be sure, no one, including TW’s editors, anticipates any really big gains — the kind that would dramatically recoup previously lost market share. On the other hand, the feeling now seems to be that industry erosion is pretty much over — and that in certain sectors, especially where new niche markets are being developed, there could even be some modest increases. One new study that probably best sums it all up is provided by Global Insight, a top business-forecasting firm. Its economists, for example, now see a steady to slightly higher level of textile mill dollar shipments for both this year and 2015 — with any losses after that, if they indeed to do occur — expected to be minimal. And the story told in another just-released publication — the U.S. Bureau of Labor Statistics’ 2014 Occupational Outlook Handbook — isn’t all that much different. Again, zero in on textile mills — this time measured in terms of production, a physical volume concept — and the average annual rate of slippage for the next decade is again put at under 1 percent. Moreover, translate this production into Global Insight’s dollar shipments yardstick — which includes some modest price increases — and some fractional gains could be in the cards.

More Productivity Gains, Too
The Occupational Outlook Handbook study just referred to contains long-term employment as well as production estimates — numbers that together can provide some hints on textile and apparel efficiency gains. In the case of domestic textile mills, for example, the only fractional declines expected for output are being accompanied by a projected 2.5-percent annual decline in the number of anticipated jobs. That’s pretty much a confirmation that recent productivity gains will continue. And the scenario for domestic apparel manufacturers is even more positive. This time, a similar less-than-1-percent annual rate of expected slippage in production is being accompanied by an eye-opening 8-percent drop-off in the number of projected workers. To be sure, the implied 7-percent or so jump in annual productivity that this implies might be on the high side. But even if you reduce this expected efficiency gain a few percentage points, it still points to an increasingly competitive domestic apparel industry. It might also be pointed out that these productivity gains are actually a bit higher than those projected for the entire U.S. economy, where the annual efficiency increase is put at only 1.5 percent. Credit several reasons for why the two industries are likely to fare better than average. But the key factor here is clearly the willingness on the part of U.S. producers to continue shelling out more than a billion dollars a year for new, state-of-the-art plant and equipment. See “More Positive Numbers,”, May/June 2014, for a more detailed discussion on industry capital spending.

A Brightening Import Picture
Meantime, still other new government data — this time on trade — are also giving industry executives something to smile about. Specifically, incoming shipments of textiles and apparel on a square-meters-equivalent basis have actually edged a bit lower in some recent months. And that’s on top of the leveling-off of the past few years. Since 2010, for example, import totals have remained relatively unchanged after rising more than 35 percent over the previous 10 years. Again, it should be emphasized that nowhere are domestic producers about to regain any meaningful portion of previously lost markets. On the other hand, these new numbers clearly represent an encouraging shift —one that is likely to continue, given such other recent signs as sharply rising overseas supplier labor costs, the now considerably lower U.S. energy tabs, consumer preference for domestically produced goods, and the growing interest on the part of U.S. companies to bring some production back to U.S. shores. Other things being equal, the combination of these factors suggests that the U.S. industries’ relatively upbeat 10-year production and shipment projections that were outlined above could actually be somewhat on the conservative side. In any case, the changing scenario would seem pretty much to assure vibrant and profitable domestic textile and apparel industries through the foreseeable future.

June 2014