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June 2013 Executive Cotton Update

June 12, 2013

Catherine Salfino

Macroeconomic Overview: Despite some evidence of weakness in the manufacturing sector, recent indicators suggest that the U.S. economy continues to expand. Rising home prices and record stock values have lifted consumer wealth and confidence. Although growth in the labor market has been slow, it has been steady, with payrolls expanding for 32 consecutive months. The improvement in the U.S. contrasts with other areas of the globe. In the Euro Zone, GDP growth has been negative in every quarter of 2012 and contracted 0.2% in the first quarter of 2013. The unemployment rate for the collective economy set a new record of 12.2% in April. Growth in China, which was an engine of growth throughout the past decade, has begun to slow. From 2000 to 2010, the average annual GDP growth averaged nearly 10%. The Chinese government’s stated goal for 2013 economic growth is 7.5%; growth in the first quarter it was 7.7%. With slow growth in the U.S., contraction in Europe, and slowing growth in China, questions remain of where and when demand may eventually surface that could pull world economic growth higher.

Employment: The U.S. economy added 175,000 jobs in May. This month’s increase was about 30,000 higher than estimates for the past two months and represents the second largest monthly increase this calendar year (added 332,000 positions in February). Revisions to figures for March (+4,000, from +138,000 to +142,000) and April (-16,000, from +165,000 to +149,000) indicated that 12,000 fewer jobs were added than previously estimated. Through the first five months of 2013, 946,000 jobs have been added. Over the same period in 2012, the figure was 1,024,000. In 2011, it was 889,000. Despite the expansion in payrolls, the unemployment rate increased marginally, from 7.5% in April to 7.6% in June. The reason the unemployment rate can increase when jobs are added is because of labor force participation. The unemployment is defined as the ratio of Americans with jobs over the number Americans looking for jobs. Last month, 420,000 Americans joined the labor force, and this increase was a primary factor behind the slight rise in the unemployment rate. In May, initial claims for unemployment insurance, which is an indicator of layoffs, averaged near 340,000. Values below 400,000 are associated with job growth.

Consumer Confidence and Spending: Since the recession, there has been slow and inconsistent improvement in consumer confidence. In May, however, the Conference Board’s Index of Consumer Confidence rose 7.2 points and reached its highest level since February 2008 and thereby marked its highest point since the onset of the financial crisis in September 2008. Likely factors contributing to the improvement in consumer attitudes are rising home prices, record stock prices, and a gradually improving labor market. Gasoline prices can also affect consumer confidence, but the national average has been increasing in recent months and may have prevented further improvement in consumer attitudes. In the latest weekly data ($3.71/gallon for the week of June 7), gasoline was about 10% higher than it averaged in January ($3.38/gallon). In the latest data from the Department of Commerce, estimates indicate that overall spending was flat in April relative to March, increasing only 0.7%. Year-over-year, overall spending in April was 2.1% higher. Figures for apparel spending were more positive. In April, clothing spending increased 1.3%. This marked the second consecutive monthly increase of more than one percent (+1.7% in month-over-month in March). Year-over-year, apparel spending was 3.7% in April.

Consumer Prices & Import Data: Retail apparel prices, as represented by the CPI for garments, declined for the third straight month in April. At its current level, the CPI indicates that April prices are 1.7% below the highest point set (January 2013) since the 2010/11 spike in fiber prices. Import prices have been stable in recent months, but in the latest seasonally-adjusted import data for April, average prices per square meter equivalent (SME) of cotton-dominant apparel imports rose $0.05 (from $3.47/SME to $3.52/SME). This marked the first time since May 2012 that average import prices moved out of a relatively tight range between $3.43/SME and $3.47/SME. Cotton-dominant import volumes increased 3.2%, but remained slightly below the quantity imported in January and February (seasonally-adjusted data). Further improvement in the U.S. economy could lift consumer confidence and spending and bring import volumes higher in coming months.

[pdfcharts]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-2.pdf”]U.S. Macroeconomic Indicators & Cotton Prices[/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-3.pdf”]Daily Cotton Price & Currency Data [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-4.pdf”]GPD Growth & U.S. Interest Rates [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-5.pdf”]ISM Indices [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-6.pdf”]Leading Indicators & Consumer Confidence [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-7.pdf”]Employment [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-8.pdf”]Housing [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-9.pdf”]Industrial Production Inventory/Shipments [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-10.pdf”]U.S. Yarn Exports [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-11.pdf”]Consumer Spending[/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-12.pdf”]Industrial Production & Inventory/Shipments [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-13.pdf”]Trade Weighted Index & Asian Currencies[/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-14.pdf”] Currencies vs. U.S. Dollar [/pdf]

[pdf pdflink=”/wp-content/uploads/2013/06/2013-06-Executive-Cotton-Update-15.pdf”]U.S. Balance Sheet & Fiber Prices [/pdf][/pdfcharts]