July 2013 Executive Cotton Update
Macroeconomic Overview: Economic indicators suggest the U.S. remains on track for moderate growth in coming months. Comments from Federal Reserve Chairman Ben Bernanke, which hinted the withdrawal of monetary stimulus could be forthcoming, resulted in some volatility in interest rates and the stock market last month. However, any discussion of the eventual withdrawal of stimulus is based on the recovery of the U.S. economy and expectations that growth will continue into the future. A range of data support expectations for further expansion, including a strengthening housing sector, gradual, but persistent, improvement in the labor market, and consumer confidence that has risen to its highest levels since late 2007.
Employment: The U.S. economy is estimated to have added 195,000 jobs in June. Previous figures for both April (+50,000, from +149,000 to +199,000) and June (+20,000, from +175,000 to +195,000) were revised higher, indicating that 70,000 more positions were added in the last two months than estimated. The four-week average for initial claims for unemployment insurance remains below 350,000. Whenever this representation falls below 400,000, it is associated with job growth. The unemployment rate for June was unchanged relative to May’s figure of 7.6%. Although job growth since the recession has been insufficient to pull the unemployment rate back to pre-recession levels, wages were 2.2% higher year-over-year in June. Over the same time period, the overall inflation rate was up 1.5%. Since wage growth outpaced inflation, the implication is that there has been some growth in real income, which should be seen as supportive of growth in consumer spending.
Consumer Confidence and Spending: In June, the Conference Board’s Index of Consumer Confidence marked its third consecutive increase of over five points. After the most recent increase of 7.1 points, the index reached 81.4, which is its highest level in more than five years (since December 2007). The Index of Consumer Confidence is derived from a monthly survey of consumer, and responses to component questions indicate that consumers are feeling more optimistic about both current and future economic conditions and are increasingly willing to purchase a home or car in coming months. Factors that may have contributed to these more optimistic attitudes include near-record stock prices, rising home values (the Case-Shiller index of national home prices was up 13.5% in the most recent data for April relative to the post-collapse low reached in January 2012), lower gasoline prices (national average price was $3.57/gallon in late May, $0.28/gallon lower than the recent high reached in March), and the gradually improving labor market. In the latest data for May, overall consumer spending was up 0.2% month-over-month in seasonally-adjusted terms. Year-over-year, total consumer spending was up 1.8%. After two months of increases, consumer spending on apparel decreased in May, dropping 0.3%. Year-over-year, consumer apparel spending was up 2.5%. A recent report from the real-estate research firm Reis Inc. that describes overall retailer leasing activity suggests that increases in consumer spending over the past couple years may have resulted in some improvement in retailer confidence and investment. Vacancy rates for total retail space declined in the second quarter to their lowest levels in more than three years. Despite the improvement, vacancy rates for both shopping malls and shopping centers remain well-above their pre-recession levels. Reasons cited in articles accompanying the Reis report indicated that the persistence of higher vacancy rates stem not only from general economic uncertainty, but also potentially from the rise of on-line shopping in certain retail sectors.
Consumer Prices & Import Data: After three consecutive months of decline, the CPI for garments increased 0.2% month-over-month in May. Year-over-year, the CPI for apparel has been negative in the each of the last two months of data (-0.4% in April and -0.5% in May). May’s reading indicates that retail clothing prices are 6.5% above their pre-spike level and 1.5% below the post-spike peak reached in January 2013. After an increase in April, the average price per square-meter equivalent (SME) of cotton-dominant apparel imports decreased in the latest available data for May (all import data seasonally-adjusted). This decline returned the average per SME back to the range between $3.43/SME and $3.47/SME that average import prices had held since May 2012 (was $3.50/SME in April). May import volumes were the highest since February, but remain slightly below the six-month average.
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-2.pdf”]U.S. Macroeconomic Indicators & Cotton Prices[/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-3.pdf”]Daily Cotton Price & Currency Data [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-4.pdf”]GPD Growth & U.S. Interest Rates [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-5.pdf”]ISM Indices [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-6.pdf”]Leading Indicators & Consumer Confidence [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-7.pdf”]Employment [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-8.pdf”]Housing [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-9.pdf”]Industrial Production Inventory/Shipments [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-10.pdf”]U.S. Yarn Exports [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-11.pdf”]Consumer Spending[/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-12.pdf”]Industrial Production & Inventory/Shipments [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-13.pdf”]Trade Weighted Index & Asian Currencies[/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-14.pdf”] Currencies vs. U.S. Dollar [/pdf]
[pdf pdflink=”/wp-content/uploads/2013/07/2013-07-Executive-Cotton-Update-15.pdf”]U.S. Balance Sheet & Fiber Prices [/pdf][/pdfcharts]