Executive Cotton Update: November 2022

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U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

For a fourth consecutive time this year, the Federal Reserve increased interest rates 0.75 percentage points. In the official statements accompanying the increase, it was acknowledged the lagged effect of rising rates on the economy and that further increases may eventually need to taper. However, comments made by the Federal Reserve chairman after the release underlined the central bank’s commitment to taming inflation, even if it meant further additional aggressive increases.

The labor market continues to add jobs and to post wage increases near five percent. However, both the pace of hiring and wage gains were slower last month. Labor is an ingredient to everything produced in the economy and is a cost to producers, so wage growth is associated with inflation. As the effects of rising interest rates are more fully transmitted through the economy, the labor market may cool and allow the slack to emerge to slow wage costs and tame overall inflation.

In the meantime, consumers have decent balance sheets established by savings accumulated with stimulus and from higher wages. Forecasts from the National Retail Federation (NRF) for the important holiday sales period suggest a six to eight percent increase in spending this year. Last year, growth was 13.5%, which was the strongest in at least 20 years.


The U.S. 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 +52,000 to +315,000. The twelve-month average for job growth is currently +442,000.

The unemployment rate moved higher, from 3.5% to 3.7% month-over-month. This increase occurred despite a slight decrease in the size of the labor force and was a result of a decrease in the number of employed workers (the unemployment rate is the ratio of the number of people working over the number of those in the labor force or wanting to work). Nonetheless, unemployment rates below four percent are rare, and there have been just a handful of other periods when it held at levels this low. Wage growth slowed to the lowest level in about a year (4.7%) in October. Despite the slowdown, the latest value easily exceeds growth rates experienced after the financial crisis, which topped out near 3.5% in the decade that followed the last recession.

Consumer Confidence & Spending

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 +0.3% month-over-month in seasonally and inflation-adjusted terms in September. Year-over-year, overall spending was up +1.9%. This was the slowest rate of annual growth since early 2021. Spending on garments was up +1.4% month-over-month but was down -0.3% year-over-year.

Consumer Prices & Import Data

Retail prices for garments decreased -0.2% month-over-month in September. Year-over-year, retail apparel prices were 6.0% higher. Year-over-year increases are affected by the reflation that occurred after the onset of COVID, when clothing prices decreased as much as -8.6% (May 2020). relative to the average in 2019, current retail prices were 2.1% higher in September.

Import costs continue to rise. The latest value for square meter equivalent (SME) of cotton-dominant apparel set a new 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.

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 fiber equivalence (weight terms), total apparel imports (all fibers) 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.

View the full report and charts.