Executive Cotton Update: October 2020

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U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

The COVID diagnosis for the president, along with rising daily case counts in locations such as Europe, emphasizes how coronavirus remains a threat to global health. As the pandemic lingers, the possibility of a resurgence in emergency shutdown orders remains, and the virus remains a threat to global economic growth.

After the improvement in recent months, there are signs that progress in U.S. economic growth may be stalling. In August (the latest month with data available), real disposable income decreased by 3.5% month-over-month. This decrease in income corresponded with the expiration of supplemental unemployment payments that were part of the stimulus package signed in late March.

With incomes lower, growth in consumer spending slowed. Overall spending increased by 0.7% month-over-month in August. This was the slowest rate of monthly spending growth since April (was -12.7%). In May, overall spending increased 8.5% month-over-month from the low level in April. In June and July, growth was 5.9% and 1.1%.

In April, when direct payment checks were distributed, real disposable income increased 15.5% month-over-month. That same month, overall spending decreased by 12.3%. The combination of higher income and lower spending resulted in a record increase in the savings rate. In April, the savings rate was 33.6%. As spending increased in later months, the savings rate remained elevated. In August, it was 14.1%. In the twelve months before the coronavirus (March 2019-February 2020), it averaged 7.4%.

The elevated savings rate suggests that consumers have money they could devote to spending. If those savings were spent, it would be a boost to economic growth. Consumer confidence in their financial outlook could help unlock spending. After setting a new post-COVID low in August, the Index of Consumer Confidence rebounded strongly in September and set a new post-COVID high.

One key to building confidence should be the labor market. In March and April, the economy lost 22.2 million jobs. Since May, the economy is estimated to have added 11.4 million jobs. By historical standards, the monthly rate of job gains since May is strong (661,000). However, the number of jobs added each month has been declining over the past three months. At September’s rate of job growth, it would take another 17 months to fill the gap between the number of jobs lost and the number already restored. Given the time expected to get the economy back to where it was before COVID, officials from the Federal Reserve have been advocating for more stimulus.


The U.S. economy was estimated to have added 661,000 jobs in September. This would rank as the highest monthly increase in payrolls after the 2008/09 financial crisis, but it is sharply lower than the job gains in recent months (+2.7 million in May, +4.8 million in June, +1.8 million in July). Revisions to figures to both July (+27,000) and August (+118,000) were both positive.

The unemployment rate fell from 8.4% to 7.9%. The decline was due to the increase in employment as well as a decrease in the number of people looking for work. Relative to February (pre-COVID), 4.4 million people dropped out of the labor force.

Consumer Confidence & Spending

After two months of decreases, the Index of Consumer Confidence posted its largest month-over-month increase since 2003 (+15.5 points, from 86.3 to 101.8). The current value is above the long-term average (95.5 from the late 1960s to the present) but is down 24.5 points year-over-year.

Overall consumer spending increased 0.7% month-over-month in August. Year-over-year, overall spending was 3.2% lower. Apparel spending was 0.5% higher month-over-month but was 2.5% lower year-over-year. Revisions lowered last month’s figure for the year-over-year change in apparel spending from -0.4% to -3.6%. With the revisions, there has been consistent improvement in the rates of year-over-year change in consumer apparel spending every month since April.

Consumer Prices & Import Data

Retail apparel prices, as measured by the CPI for garments, increased month-over-month for the third consecutive month in August. Despite the monthly increases, the CPI is 6.4% lower year-over-year, and outside of the COVID-affected months, it is the lowest value since the late 1980s. In seasonally-adjusted terms, the average price per square-meter equivalent (SME) of cotton-dominant apparel increased by 1.3% month-over-month in August. Year-over-year, the average import prices for cotton-dominant apparel were 10.2% lower.

The rate of year-over-year decrease in apparel import volumes narrowed in August. For cotton-dominant apparel, SME volume was -8.0% lower. In other COVID-affected months, volumes were -41.4%, -66.9%, -42.4%, and -20.2% (April to July). Man-made fiber (MMF) dominant volume was 15.5% lower in August. In other COVID-affected months, MMF-dominant volumes were -40.1%, -52.5%, -28.2%, and -23.9% year-over-year.

View the full report and charts.