Executive Cotton Update: March 2022

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U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

With the invasion of Ukraine, the world suddenly became a different place. Along with the pandemic, shipping constraints, and inflation, the war represents yet another source of uncertainty and volatility. One market notably affected by the conflict is oil. Current oil prices sharply contrast to the situation less than two years ago, when oil futures briefly traded at negative values. A barrel of (Brent) oil has recently been trading at over $130/barrel. In December, the average was below $75/barrel (about half of current values).

Energy is a prerequisite for most economic activity, making higher energy costs difficult to mitigate for businesses and consumers. The national average price for gasoline in the U.S. climbed over four dollars a gallon in early March and was near the all-time record set in 2008 ($4.11/gallon, not adjusted for inflation).

Energy is just one source of inflation-related concerns for the economy. The overall inflation rate was over seven percent in December and January. The Federal Reserve initially regarded inflation as transitory, driven by short-term factors associated with the immediate recovery following the pandemic. Their thinking has evolved, and the Federal Reserve is widely expected to begin increasing interest rates at their meeting in the middle of March. Higher interest rates can slow inflation but can also slow economic growth.

Retail clothing prices have been rising but have only recently caught up to pre-pandemic levels. With the onset of the pandemic, the CPI for garments was down as much as 8.6% year-over-year. Consumer apparel prices increased month-over-month in the four past months of data (through January) and have been higher year-over-year for the past ten months. However, with the sharp declines that followed the initial spread of COVID, values did not surpass the levels from early 2020 (pre-pandemic) until December 2021.

The latest value (for January) is still below readings from the summer and fall of 2019. Sourcing costs lag fiber prices by about nine months. Given the run in fiber prices, it can be expected that import costs will continue to rise. Statistically, the relationship between fiber prices and retail prices is less consistent, but the trajectory of sourcing costs and overall inflation suggest further increases in clothing prices are possible.

An offsetting and enabling factor relative to inflation is rising wages. For consumers, higher incomes can allow purchases to continue despite higher prices. However, higher wages are a cost for businesses, and the added cost pressure can lead businesses to raise prices. Central banks attempt to break the cycle of rising wages, costs, and prices by increasing interest rates. The process requires delicate handling. The timing and magnitude of rate increases can be expected to contribute to volatility across financial markets.


In February, the U.S. economy was estimated to have added +678,000 jobs. Previous estimates for December increased by +78,000 to +588,000, and the previous figure for January rose by +14,000 to +481,000. The 12-month average for job gains is +561,000. Since COVID, there has been a net loss of -2.7 million workers.

The unemployment rate fell -0.2 points to 3.8% and is low by historical standards. There have been only six other periods since World War II when unemployment fell below four percent. Wages increased 5.1% year-over-year in February. Excluding the volatility in wage growth that occurred with the pandemic and direct payments, recent wage growth has been the strongest since at least 2007 (as far back as the wage data series goes).

Consumer Confidence & Spending

The Conference Board’s Index of Consumer Confidence decreased for a second consecutive month in February, dropping 0.6 points to 110.5. This is below the recent peak of 128.9 set in June 2021 and below pre-pandemic levels near 130. Current values are also above pandemic-related lows near 85 and above the long-term (since 1970) average of 93.5.

Both overall and apparel spending rebounded in January. After dropping 1.3% month-over-month in December, overall consumer spending was up +1.5% month-over-month and +5.4% year-over-year in January. After dropping 6.9% month-over-month in December, apparel spending was up +4.8% month-over-month and +10.8% year-over-year in January.

Consumer Prices & Import Data

The CPI for apparel increased +1.2% month-over-month in January (latest available) and has been higher for each of the last ten months. Year-over-year, the CPI was 5.1% higher.

In seasonally-adjusted terms, the average price per square meter equivalent (SME) of cotton-dominant apparel has been stable for the past three months (Nov-Jan). Year-over-year, the import prices were 12.6% higher in January. Compared to pre-pandemic levels (February 2020), import costs were 2.1% higher in the first month of the year

View the full report and charts.