U.S. Macroeconomic Indicators & the Cotton Supply Chain
The International Monetary Fund (IMF) just released an updated set of forecasts for economic growth around the world. The latest IMF estimate for global economic growth in 2021 is 6.0%. This is 0.5 points higher than the forecast released in January and is nearly double the average rate of growth from 2010 to 2020. In 2022, growth is expected to remain above average (4.4%).
For the U.S., the IMF projects 6.4% growth in 2021. This is 1.3 points higher than the prediction in January (5.1%). If realized, this would be the first time the U.S. grew more than five percent since 1984. The U.S. service sector expanded at a record pace in March. The service sector represents nearly 70% of the U.S. economy, and its recent strength suggests robust economic growth in the second quarter and beyond as consumer activity continues to progress toward normal and more pent-up demand is released.
For both the world and the U.S., the improved outlook is a result of additional fiscal stimulus and the rollout of vaccines. Due to policy responses around the world, the IMF expects the COVID-driven recession to leave fewer lasting scars on the global economy than the financial crisis of 2008.
The title of the IMF report was “Managing Divergent Recoveries”, highlighting imbalance and underlining discrepancies in response to COVID. The U.S. has already given more than 150 million shots (complete vaccination may require more than one shot, the U.S. adult population is 255 million). This is before all adult Americans have had access to vaccines (all will become eligible on April 19th).
Meanwhile, much of the rest of the world has struggled to acquire doses and new highly contagious variants have emerged. Despite the onset of vaccination, there have been near record daily cases in certain U.S. states. In Europe, where vaccinations have also been underway, new lockdown orders were put into effect in late March. Until the world is able to collectively achieve a degree of immunity, COVID can remain a threat to economic health.
In March, the U.S. economy was estimated to have added +916,000 jobs. This represents the largest monthly addition in six months. Revisions to figures for previous months were positive, with values for January (up 67,000 to +233,000) and February increasing (up 89,000 to +468,000). The net change in jobs since March 2020 is -8.4 million.
Job losses continue to be high. Since the pandemic hit the U.S. in March, there has only been one week that counts of initial claims for unemployment insurance were below the peak from the 2008-09 recession (665,000).
In March, the unemployment rate declined from 6.2% to 6.0%. The current level is 8.8 points lower than the post-pandemic high (14.8% in April 2020) but is 2.5 points higher than the value before COVID (3.5% in February 2020).
The Conference Board’s Index of Consumer Confidence increased sharply in March, rising from 90.4 to 109.7. Prior to COVID (February 2020), the value was 132.6. Since COVID, values briefly increased in September and October to levels over 100, but otherwise have been near 90. The long-term average is near 93.
After strong gains in January (+3.0%), overall consumer spending decreased -1.2% month-over-month in February (latest month with available data). Year-over-year, overall spending was down -2.1%. Overall spending has been negative year-over-year every month since the pandemic (March 2020).
After an extraordinarily strong month-over-month increase in January (+10.5%), spending on apparel was down -3.7% in February. Year-over-year, apparel spending was +2.0% higher. This represents the fourth month that spending on clothing has been higher year-over-year since the pandemic (September +6.5%, October +2.8%, January +5.0%, February +2.0%). Interspersed with those increases were months with year-over-year decreases (November -0.4% and December -5.8%).
Retail prices for apparel decreased month-over-month for the first time in four months in February (-0.9%). Year-over-year, aggregate clothing prices were down -4.0%.
The average cost per square-meter-equivalent (SME) of U.S. cotton-dominant apparel imports was near $3.00/SME (seasonally adjusted) in the latest data (shipments arriving in February). Year-over-year, the average cost per SME is down 9.9%. This contrasts sharply with the year-over-year increases in fiber and yarn prices, which have been higher year-over-year for many of the past several months. It may also be notable that the magnitude of decreases in sourcing costs has been lower than the decreases in retail prices.