Executive Cotton Update January 2024

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U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

The holiday shopping period generally fell in line with expectations. After an erratic set of years following the pandemic, the National Retail Federation (NRF) predicted the increase for the 2023 holiday sales season could be +3- 4%, which is near the longer-term range for growth. In the data available, indications are that consumers spent +3.1% more in November and December (figures from Mastercard SpendingPulse). However, it should be noted that this number is not adjusted
for inflation. Inflation has been falling, with the latest reading for the overall rate also being +3.1% (Bureau of Labor Statistics CPI for all goods and services). With spending growth and inflation even, an implication is that purchases in terms of aggregate unit volumes were flat.

The inflation measure tracked more closely by the Federal Reserve is derived using different sources and methods than the headline CPI. The overall inflation reading from this alternative to the CPI (published by the Bureau of Economic Analysis or BEA) decreased month-over-month in the latest available data (-0.1% between October and November). This was the first time prices marked a monthly decrease since April 2020 (when the U.S. and much of the world were under COVID lockdowns).

Year-over-year, overall prices measured by the BEA were +2.6% higher in November. Core inflation, which excludes food and energy and is the series followed by the Federal Reserve for interest rate policy, was +3.2% higher year-over-year. Both readings are well below the peak inflation rates set in 2022 (+7.1% for the overall BEA reading and +5.6% for the core BEA reading). The Federal Reserve’s inflation target is two percent for the core BEA measure.

Higher interest rates have helped bring the BEA’s core measure of inflation closer to that target. In combination with the strength of the labor market, the reduction in inflation has supported the notion that a soft economic landing is possible after the strongest increases in interest rates in decades. Although inflation rates remain above the Federal Reserve’s target, comments from officials with the Federal Reserve have suggested that interest rates could be cut in 2024. A reduction in rates could support economic growth, which is forecast to be sluggish. Surprises have been to the upside for the U.S. recently, but the current projection from the International Monetary Fund (IMF) for the U.S. in 2024 is +1.5%, which is lower than the IMF estimate of +2.1% for 2023.


The U.S. economy is estimated to have added +216,000 new jobs in December. Revisions to previous months were negative, with the figure for October dropping -45,000 to +105,000 and the figure for November dropping -26,000 to +173,000. The current twelve-month average is +225,000.

The unemployment rate was unchanged at 3.7% and remains at a historically low level. Wages increased +4.1% year-over-year in December, which was marginally higher than the +4.0% rate registered in November, but a downward trend has been in place since the post-stimulus peak of +5.9% was recorded in March 2022. Wage growth has exceeded the overall CPI since May 2023.

Consumer Confidence & Spending

The Conference Board’s Index of Consumer Confidence increased sharply in December, rising +9.7 points to 110.7. This was the largest monthly increase since a round of direct payment stimulus was released in March 2021. The Conference Board attributed the surge to a more positive outlook regarding current economic conditions and a less pessimistic perception of the economy’s trajectory (longer-term views remain less optimistic than those for the shorter-term).

In inflation-adjusted terms, overall consumer spending increased +0.3% month-over-month in November. Year-over-year, overall spending was +2.7% higher.

After a decrease in October (-0.7%), consumer spending on apparel increased month-over-month in November (+1.7%), notching the largest gain since March 2022. Part of the reason for the healthy number in November could be a rebound after October’s decrease. Nonetheless, the strength of the increase should support sales figures for clothing over the holiday period. Year-over-year, spending on clothing was +1.9% in November, which represented the first year-over-year increase in spending on apparel in nine months.

Consumer Prices & Import Data

Retail prices for apparel decreased -1.5% month-over-month in November, which could be a sign of retailer discounting. Year-over-year retail apparel prices were +1.3% higher, the lowest annual rate since COVID.

Import costs, as represented by the average price per square meter equivalent (SME) of cotton-dominant apparel, decreased for the sixth consecutive month in November. Since their post-COVID peak of $4.26/SME in November 2022, import prices have fallen 14%. Despite the decreases, the average price in November was 6% above the 2019 average ($3.65/SME in November, $3.45 average in 2019).

View the full report and charts.