Import costs continue to rise. The latest value for square metre equivalent (SME) of cotton-dominant apparel set a record (data since 1989) in seasonally adjusted terms $4.11/SME. Recent values represent quite a reversal relative to the values that were posted in the wake of COVID. In March 2021, which allowed for a 12-month lag after the onset of the pandemic, the average cost per SME was below $2.97/SME. Levels below three dollars per SME were only recorded in one other period on record, and that was after the financial crisis, Cotton Inc said in the US Macroeconomic Indicators & the Cotton Supply Chain for November 2022.
Retail prices for garments decreased 0.2 per cent month-over-month in September. Year-over-year (YoY), retail apparel prices were 6.0 per cent higher. YoY increases are affected by the reflation that occurred after the onset of COVID, when clothing prices decreased as much as 8.6 per cent (May 2020), as per the Executive Cotton Update by Cotton Incorporated.
The combination of high and rising sourcing costs and an increasingly challenging retail environment can be expected to pressure retailer margins. These challenges will compound issues related to inventory. After struggling to keep up with consumer demand following the release of stimulus and with the shipping crisis, apparel import volumes have been strong in recent months. In seasonally adjusted terms for raw fibre equivalence (weight terms), total apparel imports (all fibres) were the highest on record between February and June. More recent figures have declined slightly but remain higher than the average before COVID and may add to inventories, particularly if the consumer environment slows.
After two monthly increases, the Conference Board’s Index of Consumer Confidence decreased month-over-month in October (from 107.8 to 102.5). The current value is the lowest since July. In both June (98.4) and July (95.3), readings were below 100. These were the only two values below 100 since early 2021. The lowest value reached after COVID was 85.7. The long-term average (since 1970) is 93.9.
Overall consumer spending increased by 0.3 per cent month-over-month in seasonally and inflation-adjusted terms in September. Year-over-year, overall spending was up 1.9 per cent. This was the slowest rate of annual growth since early 2021. Spending on garments was up 1.4 per cent month-over-month but was down 0.3 per cent year-over-year, as per the report.
The labour market continues to add jobs and to post wage increases near five per cent. However, both the pace of hiring and wage gains were slower last month. The US economy was estimated to have added 261,000 jobs last month. This was the lowest addition since December 2020, but job growth has nonetheless remained resilient to interest rate increases. Revisions to previous months were mixed. The figure for August fell 23,000 positions to 292,000. The figure for September rose by 52,000 to 315,000. The twelve-month average for job growth is currently 442,000.
The unemployment rate moved higher, from 3.5 per cent to 3.7 per cent month-over-month. This increase occurred despite a slight decrease in the size of the labour force and was a result of a decrease in the number of employed workers.
Wage growth slowed to the lowest level in about a year (4.7 per cent) in October. Despite the slowdown, the latest value easily exceeds growth rates experienced after the financial crisis, which topped out near 3.5 per cent in the decade that followed the last recession.
Fibre2Fashion News Desk (KD)
