Executive Cotton Update November 2023

Posted on

U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

Mixed signals surfaced for the U.S. economy over the past month. After a surprisingly strong GDP figure (+4.9% in the third quarter) came a weaker number for job growth (+150,000 in October, which was about half the value of +297,000 posted for September). The slowdown in hiring last month was affected by the strike by autoworkers. The strike appears to be near a conclusion, and it might be a distortive factor for employment numbers again whenever strikers return to work.

The precedent for a U.S. recession to follow interest rate increases is strong, with the U.S. consistently dipping into recession after cycles of rate increases in recent decades. A commonly cited reason why the economy has been able to hold off a contraction is that the labor market has been robust. In modern U.S. history, it has been rare that the unemployment rate has been able to hold onto levels below four percent, but unemployment has not been higher than four percent since the fourth quarter of 2021.

There may be several reasons why the labor market has held up so well. These include demographics (the large baby boomer generation has been retiring, and replacements have been needed) and the stimulus unleashed during COVID. Estimates regarding the amount that consumers may still have in savings vary, but whatever the level is, it has been supplemented by wage growth. With the collapse in inflation, the year-over-year rate of change in income has exceeded the year-over-year rate of change in the cost of living since May.

Both savings and income likely contributed to the growth of consumer spending since the pandemic and the 4.0% quarter-over-quarter increase in expenditures in the fourth quarter. Spending growth in the fourth quarter was the highest rate since the fourth quarter of 2022, when stimulus was fresh. Consumer spending represents more than half of GDP, and a recent uptick in outlays drove the latest GDP number. Nonetheless, there are still fears that a slowdown in consumer demand may be looming due to the steep rise in interest rates over the past year and a half.

Forecasts for the important holiday sales period suggest slower growth in spending than in recent years. The National Retail Federation (NRF) recently published a projection indicating growth of 3-4%. The rate is lower than any other year since the pandemic (+9.1% in 2020, +12.7% in 2021, +5.4% in 2022), but it is in line with the average experienced between the financial crisis and the onset of COVID.


The U.S. economy is estimated to have added +150,000 new jobs in October. Revisions to numbers for previous months were negative (August -62,000 to +165,000 and September -39,000 to +297,000). The current twelve-month average is +258,000.

The unemployment rate increased slightly, from 3.8 to 3.9%, but remains at a historically low level.

Wage growth continues to slow. The peak post-stimulus was 5.9% year-over-year in March 2022, and the year-over-year increase in October was 4.1%.

Consumer Confidence & Spending

The Conference Board’s Index of Consumer Confidence decreased for the third consecutive month. In October, the value dropped 1.7 points, from 104.3 to 102.6. It remains in the range between 102 and 115, which has held values since August 2022. The index was virtually unchanged year-over-year in October (it was 102.2 in October 2022).

Overall consumer spending was +0.4% higher month-over-month in September. Year-over-year, overall spending was +2.4% higher. Spending on garments was up +0.9% month-over-month but was down -0.6% year-over-year. September marked the seventh straight month that apparel spending was lower year-over-year. Overall spending has been higher year-over-year for more than thirty consecutive months.

Consumer Prices & Import Data

Retail prices for apparel decreased month-over-month for the second consecutive month in September. The decrease in August was small (-0.04%), but the change in September was meaningful (-1.1%). Year-over-year, the CPI for apparel was +2.7% higher, which was the lowest annual rate of increase in two years. Price levels remain above the values before the pandemic, and excluding the figure from the past three months, current values are the highest since 2013.

Average import prices for cotton-dominant apparel increased slightly month-over-month in September (+$0.05 per square meter equivalent or SME). The latest value is -12.4% lower than the peak set in November 2022 but is +9.6% higher than the average in 2019.

View the full report and charts.