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January 2014 Executive Cotton Update

January 20, 2014

Catherine Salfino

Macroeconomic Overview: Apart from the latest employment figures, which indicated that the fewest jobs were added last month since January 2011, recent economic data have been generally positive and many economic forecasters are calling for stronger economic growth in 2014. The latest revisions to GDP estimates indicate that the U.S. economy grew 4.1% in the third quarter, representing the fastest pace of growth since the fourth quarter of 2011, and the second fastest rate of growth since 2006. 2013 marked the best year for the stock market since the 1990s. The Dow Jones Industrial Average, representing stock prices for major U.S. companies, increased more than 25% and set a series of record highs last year. The housing market continues to improve. The industry trade group, CoreLogic reported that average home prices increased 11.8% in 2013. In the latest available data for November, construction spending reached its highest level in nearly five years. Although the actions of Federal Reserve have had a significant impact, the strong performance of the stock market may also indicate that investors are becoming more optimistic about the U.S. economy. Higher prices for both stocks and houses imply gains in consumer wealth, which can lift confidence and spending.
While a range of economic data suggest the U.S. economy is on track for stronger growth in 2014, the labor market continues to improve at a slow pace, which has constrained improvement in consumer income, confidence, and spending. Gradual improvement in the labor market can be expected to lead to gradual increases in spending. For the 2013 holiday period, sales volumes reported by MasterCard SpendingPulse indicated year-over-year growth of 3.5%. This figure is slightly lower than the 3.9% forecast by the National Retail Federation (NRF) and equal to the rate of holiday spending growth in 2012. It was reported by several retail consultants that promotions were the most prevalent since 2008.
Employment: The Bureau of Labor Statistics estimates that the U.S. economy added 74,000 jobs in December. This increase is less than half the average from the rest of 2013 (+192,000). The exceptionally cold weather experienced last month impacted hiring in certain industries, notably construction and tourism, and may partially explain the smaller gain in December payrolls. Other data sources suggest that December’s figure would have been larger, and there may be some reason to expect the current estimate to be revised higher in future reports. In this month’s report, the previous estimate for November was raised by 38,000 positions (from +203,000 to +241,000). The unemployment rate, which is derived from a different survey than the payroll data, fell from 7.0% to 6.7%, reaching its lowest level since October 2008 – the month when the financial crisis began to take hold. This month’s decline was the largest since September 2012. The drop has been attributed to an increase in the number of jobs (+143,000 in this survey) and a decrease in the number of people looking for work. The four-week moving average for initial claims for unemployment insurance moved slightly higher in recent weeks, climbing from values near 330,000 to those near 350,000.
Consumer Confidence and Spending: The Conference Board’s Index of Consumer Confidence increased 6.1 points in December, climbing to its highest level since September, erasing most of the decline that occurred in October and November alongside the political uncertainty of the government shutdown. In the latest available Department of Commerce data for November, overall consumer spending increased 0.5% month-over-month. This represented the largest monthly increase since February 2012. After increasing 2.0% in October, apparel spending increased 0.4% in November. Year-over-year, overall spending was 2.6% higher in November; apparel spending was 2.5% higher.
Consumer Prices & Import Data: The CPI for apparel decreased marginally (-0.3% month-over-month) in the latest available data for November. At their current level, average prices for garments are 6.3% higher than they were prior to the 2010/11 spike in fiber prices and 1.3% lower than the recent high set in August 2013. The average import price per square-meter equivalent (SME) of cotton-dominant apparel decreased slightly in the latest available data for October. Even with the decrease, import prices remain in the same general range between $3.42/SME and $3.53/SME that they have been in since the spring of 2012. In terms of unit volume, both cotton-dominant and overall apparel import volumes have been steady in recent months. For the first ten months of 2013, overall apparel imports were up 3.8% year-over-year in terms of SMEs. Stronger rates of economic growth could imply stronger growth in import volumes in 2014.


[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-2.pdf”]U.S. Macroeconomic Indicators & Cotton Prices[/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-3.pdf”]Daily Cotton Price & Currency Data [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-4.pdf”]GPD Growth & U.S. Interest Rates [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-5.pdf”]ISM Indices [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-6.pdf”]Leading Indicators & Consumer Confidence [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-7.pdf”]Employment [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-8.pdf”]Housing [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-9.pdf”]Industrial Production Inventory/Shipments [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-10.pdf”]U.S. Yarn Exports [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-11.pdf”]Consumer Spending[/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-12.pdf”]Industrial Production & Inventory/Shipments [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-13.pdf”]Trade Weighted Index & Asian Currencies[/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-14.pdf”] Currencies vs. U.S. Dollar [/pdf]

[pdf pdflink=”/wp-content/uploads/2014/01/2014-01-Executive-Cotton-Update-15.pdf”]U.S. Balance Sheet & Fiber Prices [/pdf][/pdfcharts]