A Cautious Start To 2020 For U.S. Textiles

By Jim Borneman, Editor In Chief

The litany of positive economic data in the United States has almost become mind numbing. Positive jobs data, low unemployment, low inflation, reduced regulation, the new USMCA in place, energy independence, low oil prices, completion of the phase one U.S.-China trade agreement, an active investment environment, record breaking stock market levels — what more could you ask for?

Global economies are a different story. As the United States has shifted focus away from passive globalism, Europe and Asia are highly intertwined and interdependent.

The International Monetary Fund (IMF)’s latest World Economic Outlook Update calls for a sluggish recovery in the Euro Area with projected growth of 1.3 percent in 2020 and 1.4 percent in 2021.

The IMF projects growth in Germany of 1.1 percent in 2020 and 1.4 percent in 2021, while Italy’s projected growth is a dismal 0.5 percent in 2020 and 0.7 in 2021 — still shy of the 0.8 percent growth rate reported for 2018.

By comparison, the IMF anticipates 2.0 percent growth in 2020 and 1.7 percent growth in 2021 in the United States. China and India still maintain the highest projected growth in the high 5 to 6 percent range but both down from 2018.

Through this lens, a sense of caution among U.S. executives is understandable. On the plus side, USMCA and U.S.-China phase one trade agreements may improve trade conditions and the very structure of international trade.

This situation reminds one of the account of a prominent, well-liked, up-and- coming lawyer with a winning record and Generalized Anxiety Disorder. As the winning record ever increases, so does the inability to sleep and frequency of panic attacks. The fear of the upcoming imminent loss — tarnishing the winning reputation — is almost too much to bear. In many ways, responsible, well-liked business executives can fall victim to the same fears.

With all of this great U.S. economic data, and capital pouring into U.S. markets from around the globe, what will cause the music to stop?

Will it be a virus from China? An unforeseen political outcome or event? Unsupported market speculation the likes of the dotcom bubble or a financial meltdown? When the music stops will the correct decisions have been made, will the company be positioned to find an open chair or be forced to stand and exit the game?

As of TW’s publication date, the opportunities seem to outweigh the risks. In a way, some of the risks are actually creating opportunities.

The Coronavirus has companies reconsidering supply chains and the risk burden associated with outsourcing to China — this at a time when trade with China has been under such pressure in negotiating the U.S.-China phase one trade agreement. Will it create a positive environment for the next phase of the agreement?

Will this scare and the positive business environment in the United States increase the attractiveness of investing in U.S. manufacturing including textiles?

Will the U.S. consumer remain unphased and keep the economy humming along?

Will the election year noise and seriously divisive politics add risk, or play to an empty hall while business motors on?

Certainly more questions than answers — but the United States is in a great position. According to the IMF the United States has experienced “the longest economic expansion in recorded history”— why stop now?

January/February 2020