Executive Cotton Update December 2023

Posted on

U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

The traditional holiday sales season began during the extended weekend that followed Thanksgiving (Nov 23-27, including Cyber Monday). Initial reports suggest spending growth was nearly 8% higher year-over-year that weekend (figure from Adobe Analytics). This was stronger than generally forecasted, with the National Retail Federation predicting 2023 spending for the entire shopping period will be 3-4% higher year-over-year.

However, the outlook for holiday spending this year is clouded by a swirl of conflicting economic influences. Consumers may still be able to spend savings accumulated with stimulus following the pandemic, but it is unknown how much remains and how much could still be allocated towards purchases. Although inflation continues to be a concern, it has slowed. Prices remain at higher levels, but the inflation rate has been below the rate of wage growth since May (inflation was rising faster than wages from April 2021 through April 2022), and the labor market remains tight. Interest rates have climbed sharply and worries that an economic slowdown could be looming have weighed on consumer confidence.

Nonetheless, the latest U.S. GDP data describe the strongest rate of quarterly growth since the stimulus-driven period after COVID (excluding figures from 2020 and 2021, the +5.2% growth rate in Q3 2023 is the strongest rate of quarterly GDP growth since 2014), and the largest contributor to this growth was consumer spending. Forecasters have been expecting the net result of these competing factors to result in a sales season with growth near the longer-term averages (between 3-4%, as mentioned above).

Adjustment of holiday sales figures for inflation is complicated this year. This makes figures expressed in value terms more difficult to interpret relative to what they imply for product volumes. Higher prices could imply that the volume of goods represented by figures for spending growth could be close to flat. However, it has been reported that retailers have been discounting earlier in the season to entice shoppers. If widespread, these price reductions could offset some of the influence of inflation.

Regardless of the eventual result of price-related effects, many participants in supply chains would appreciate the movement of inventory to stimulate order placement. The International Textile Manufacturers Federation (ITMF) reported that respondents to its survey on business conditions was the lowest on record (data only extends back to 2021, but it covers weakness caused by the pandemic), with widespread weakness reported across regions and each stage in apparel manufacturing. U.S. cotton-dominant apparel imports in October (seasonally-adjusted) were -21% lower than the 2019 average. U.S. imports have been down between – 9% and -25% relative to the 2019 average every month since October of last year.


The U.S. economy is estimated to have added +199,000 new jobs in November. Revision lowered the previous number for September -35,000 to +262,000. The figure for October was unchanged at +150,000. The current twelve-month average is +233,000.

The unemployment rate decreased slightly, from 3.9 to 3.7%, and remains at a historically low level.

Wage growth continues to slow. The peak post-stimulus was +5.9% year-over-year (March 2022). The year-over-year increase in November was +4.0%. A figure for the overall inflation rate in November has not been released yet, but it was +3.2% in October.

Consumer Confidence & Spending

The Conference Board’s Index of Consumer Confidence increased for the first time in four months in November (+2.9 points, to 102.0). The current value is in line with figures from the holiday sales period last year (the average for the index between October and November 2022 was 101.8).

Overall consumer spending was +0.2% higher month-over-month in October. Year-over-year, overall spending was +2.2% higher. Spending on garments was down -0.6% month-over-month and down -0.5% year-over-year. October marked the eighth straight month apparel spending was negative year-over-year.

Consumer Prices & Import Data

Retail prices for apparel increased +0.2% month-over-month in October. This followed two month-over-month decreases (-0.04% in August and -1.1% in September), which may be a reflection of retailer discounting. Year-over-year, the CPI for apparel was +3.0% higher in October. Price levels remain above the values before the pandemic (the value in October was +5.2% higher than the average in 2019).

Average import prices for cotton-dominant apparel decreased month-over-month in seasonally-adjusted data for October (-$0.09 per square meter equivalent or SME). The latest value is -14.9% lower than the peak set in November 2022 but is +6.6% higher than the average in 2019.

View the full report and charts.