Executive Cotton Update: January 2021

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U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

COVID was a dominant force in 2020, and it has already underlined its importance in 2021. In the U.S., daily rates for new case counts, hospitalizations, and deaths are all at near-record levels. A surge followed the Thanksgiving holiday and triggered new restrictions in several cities and states. Concerns remain about further increases after the December holidays. There has already been an observable economic response to recent restrictions on consumer activity. Most notably, the monthly change in payrolls turned negative in December, representing the first monthly decrease since April.

The vaccination process in the U.S. is behind schedule but promises to provide an eventual solution to the health crisis. In the meantime, the second round of stimulus was eventually approved to address COVID’s economic consequences. Direct payments of as much as $600 per individual have already begun being distributed.

Alongside the simple reopening process, the strength of fiscal and monetary stimulus has been credited with pulling the U.S. economy to record quarter over quarter growth in the third quarter. Official data for the fourth quarter have not been released yet, but a Federal Reserve prediction tool (GDPNow) is projecting growth near 8%. Due to the current rise in COVID, growth in the first quarter of 2021 is expected to be sluggish. Later in the year, as more vaccines are given, expectations are that growth will accelerate.

Consumer spending over the important holiday sales period got off to a strong start but momentum faded. Government spending data for December are not yet available. Mastercard Spending Pulse estimates that retail sales (excluding cars and gasoline) from November 1st through Christmas Eve increased +2.4% year over year. E-commerce sales were reported to have risen +47.2% year over year. Retail sales for apparel through all channels (including online sales) were down -19.1%, while online apparel sales were +15.7% higher year over year.

The events of January 6th alone suggest that 2021 will be a year remembered for political unrest. Whether or not the bout of violence at the capitol will quell tensions is unknown. Financial markets have proven resilient. U.S. stock indices were flat to higher throughout early January, including on January 6th. The same was true for cotton prices, whose upward trend remains intact.


The U.S. economy was estimated to have lost 140,000 jobs in December. This is the first monthly decline since April. Current estimates indicate that the net change in U.S. jobs in 2020 was -9.4 million. There has also been a decline in the number of people wanting to work. The labor force is currently estimated to be four million workers lower than it was at the start of 2020.

The decrease in the labor force is a factor that has helped keep the unemployment rate lower (the unemployment rate is the ratio of the number of people working over the number of people wanting to work). Month over month, the unemployment rate held steady at 6.7%. In early 2020, the unemployment rate was 3.5%.

Consumer Confidence & Spending

The Conference Board’s Index of Consumer Confidence decreased 4.3 points month over month to a level of 88.6 in December. Last December, the value was 128.2. The long-term average is near 93.

Overall consumer spending was down -0.5% month over month in November (the latest month with available data). Year over year, overall spending was down by -2.4%. Spending on apparel was down -4.3% month over month in November but was +0.5% higher year over year.

Consumer Prices & Import Data

After two months of decreases, the CPI for apparel was +0.8% higher month over month in November. Year over year apparel prices were -6.1% lower. Import prices for cotton-dominant apparel continue to move lower (in seasonally-adjusted terms of USD per square meter equivalent or SME). In November, the average price was $3.04/SME. This is the lowest value since September 2010, which was before the price spike and during a time when values were still being negatively affected by the global financial crisis.

Import volumes of cotton-dominant apparel have been higher year over year in the past two months of available data (+6.3% in October, +9.3% in November). However, year-ago comparisons are being made against months from 2019 after the U.S. imposed supplement tariffs on Chinese apparel. Although they targeted China, the tariffs had the effect of lowering U.S. imports from all locations. In October and November of 2019, U.S. imports from all sources were down -13.6% and -8.9% year over year. Comparing recent months in 2020 against 2018 levels (before tariffs), show that imports in October and November were down -8.2% and -0.04%.

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