executive cotton update - cottonworks

Executive Cotton Update U.S. Macroeconomic Indicators & the Cotton Supply Chain

November 2020 www.cottoninc.comMacroeconomic Overview: The U.S. presidential election is over, and one source of uncertainty for U.S. and global markets has been resolved. While a new president has been chosen, the elections did not generate a clear result for the U.S. Senate. Runoff elections in Georgia will determine whether Republicans hold onto their slight majority. Regardless of the outcome, the majority for either party will be slim and could make the passage of major legislation a challenge for the next couple years. In the next couple months, a legislative action (or inaction) to follow is whether another stimulus measure may be passed.

A combined effect of the shutdown this spring and the reopening that followed was a wide swing in data for the U.S. GDP. After a record contraction in the second quarter, there was a record expansion in the third. In the seasonally-adjusted annual rates that the Bureau of Economic Analysis uses for their headline number, the change was from -31.4% to +33.1%. Seasonally-adjusted annual rates for quarterly change can facilitate more direct comparison with annual rates but may be misleading in times of extreme volatility. An alternate way of examining GDP is in simple year-over-year terms. In the second quarter, the U.S. economy was -9.0% smaller year-over-year. In the third quarter, U.S. economic activity was -2.9% lower than one year ago.

The International Monetary Fund (IMF) released updates to their projections for global GDP last month. The IMF figure for 2020 improved from -4.9% (June estimate) to -4.4%. The increase was a result of stronger than expected growth in China (+0.9 percentage points, or ppt, relative to June, to +1.9%), the U.S. (+3.7 ppt versus June, to -4.3%), and the Euro Zone (+1.9 ppt to +5.2%). For 2021, the IMF is predicting a 5.2% global expansion. This is lower than the 5.4% growth forecast in June. The U.S. is projected to grow 3.1% in 2021. The Euro Zone is expected to grow +5.2%. The Chinese economy is forecast to expand +8.2%.

Meanwhile, global COVID cases continue to climb. Both the U.S. and Europe have been setting new records for daily diagnoses. Several European countries have already announced restrictions on consumer activity. The threat of further surges in caseloads around the world is a downside risk to all economic forecasts. With the uncertainty surrounding COVID and economic conditions, the National Retail Federation (NRF) did not issue their annual projection for holiday sales growth.

Nonetheless, there are reasons to be optimistic about holiday sales. Consumer confidence is above the long-term average, consumer spending has been consistently positive, and savings rates have been elevated for the past several months, suggesting that consumers have resources they could devote to purchases.

Employment: The U.S. economy was estimated to have added 638,000 jobs in October. This is the lowest monthly increase since May (was +2.7 million in May, +4.8 million in June, +1.8 million in August, +672,000 in September). The sum of these gains is 12.1 million. In March and April, losses totaled 22.2 million. The net result is that the U.S. economy is down a little more than ten million jobs since COVID-19.

The unemployment rate fell from 7.9% to 6.9% last month. Initial claims for unemployment insurance, a proxy for layoffs, remain stubbornly high at levels above 750,000. This is about 100,000 losses above the worst weeks during the financial crisis. With layoffs elevated, a factor helping the unemployment rate has been reductions in the labor force. Compared to one year ago, the number of people wanting to work declined by 3.5 million people.

Consumer Confidence & Spending: The Index of Consumer Confidence was nearly unchanged last month (-0.4 points, from 101.3 to 100.9). At its current level, the index is 20% lower than one year ago (126.1) but is above the long-term average (93.3 since 1970).

Overall consumer spending increased 1.2% month-over-month in September but was 2.0% lower year-over-year. Spending on apparel surged 6.4% month-over-month and turned positive year-over-year. The 3.1% year-over-year increase in clothing spending in September is higher than rates commonly posted over much of the past decade.

Consumer Prices & Import Data: Retail apparel prices, as measured by the CPI for garments, decreased 0.3% month-over-month in September. Year-over-year, average apparel prices were 6.4% lower. In terms of USD per square meter-equivalent (SME), average prices for cotton-dominant apparel imports increased 0.8% month-over-month (seasonally-adjusted). Year-over-year, average import prices were 8.8% lower.

In terms of import weight volume, year-over-year levels remain below those from one year ago, but the size of the gap has gotten smaller. The raw fiber equivalence of cotton contained in U.S. apparel imports was down 3.8% in September (latest available). Between April and August, the decreases were -46%, -66%, -45%, -24%, and -11%. Ahead of the pandemic, but after the imposition of tariffs on Chinese-made goods (Sept 2019-Feb 2020), imported cotton weight was down 8% year-over-year.

U.S. Macroeconomic & Cotton Supply Chain Charts

Macroeconomic Indicators Industry & Textiles Retail Currencies Cotton GDP Growth Leading Indicators Industrial Production Consumer Spending Weighted Index U.S. Balance Sheet Interest Rates Consumer Conf. Inventory/Shipments Inventory/Sales Asia Fiber Prices ISM Indices Employment U.S. Yarn Exports Consumer Prices The Americas

Housing Polyester PPI Europe

Executive Cotton UpdateU.S. Macroeconomic Indicators & Cotton Prices

November 2020

Macroeconomic Data

Quarterly Data

5-year 1-year 6-month 3-month Q1 : 2020 Q2 : 2020 Q3 : 2020 Unit Source

Growth in US Real GDP 0.2% -0.9% -18.2% -31.4% -5.0% -31.4% 33.1% % Chg. Quarter/Quarter Department of Commerce

Macroeconomic Series with Latest Data for October

5-year 1-year 6-month 3-month August September October

ISM Index of Manufacuring Activity 53.8 54.2 50.5 55.2 56.0 55.4 59.3 Index Institute for Supply Management

ISM Index of Non-Manufacturing Activity 56.1 56.3 52.9 57.6 56.9 57.8 56.6 Index Institute for Supply Management

Consumer Confidence 116.1 122.5 91.5 93.1 86.3 101.3 100.9 Index The Conference Board

Change in Non-Farm Payrolls -9.1 -144.3 -1559.2 1308.7 1,493 672 638 Thousands of jobs Bureau of Labor Statistics

Unemployment Rate 4.9% 5.0% 10.9% 8.8% 8.4% 7.9% 6.9% Rate Bureau of Labor Statistics

US Interest Rates

Federal Funds 1.2% 1.5% 0.1% 0.1% 0.1% 0.1% 0.1% Interest rate Federal Reserve

10-year Treasury Bill 2.1% 2.1% 0.7% 0.7% 0.7% 0.7% 0.8% Interest rate Federal Reserve

Macroeconomic Series with Latest Data for September

5-year 1-year 6-month 3-month August September September Unit Source

Index of Leading Economic Indicators 105.8 108.9 103.1 106.2 105.0 106.5 107.2 Index The Conference Board

Housing Starts 12.4 12.9 13.2 14.0 1.5 1.4 1.4 Annual pace, millions of units Department of Commerce

Existing Home Sales 5.4 5.3 5.4 6.3 6.3 6.0 6.5 Annual pace, millions of units National Association of Realtors

Industrial & Textile Data

Industrial & Textile Series with Latest Data for September

5-year 1-year 6-month 3-month July August September Unit Source

US Industrial Production 105.2 106.8 99.0 101.8 102.2 101.5 101.5 Index, 2002=100 Federal Reserve

Polyester Fiber PPI 107.5 96.6 95.8 97.5 98.2 97.9 98.2 Index, December 2003=100 Bureau of Labor Statistics

Industrial & Textile Series with Latest Data for August

5-year 1-year 6-month 3-month June July August Unit Source

Bale Equivalence of US Cotton Yarn & Fabric Exports 3.3 2.1 1.3 1.6 0.9 1.7 2.1 million 480lb bales USDA ERS

Industrial & Textile Series with Latest Data for September


US Textile Mill Inventory/Shipments Ratio 1.37 1.40 1.48 1.40 1.40 1.41 1.38 Ratio Department of Commerce

Retail Data

Retail Series with Latest Data for September


US Real Consumer Spending

All Goods and Services 1.6% 0.8% -4.6% -2.5% -3.6% -3.1% -2.0% % Chg. Year/Year Department of Commerce

Clothing 0.7% 0.1% -6.0% -0.1% -3.2% -3.3% 3.1% % Chg. Year/Year Department of Commerce

Consumer Price Indices

Overall 1.8% 1.9% 0.9% 1.4% 1.0% 1.3% 1.4% % Chg Year/Year Bureau of Labor Statistics

Clothing -1.2% -2.0% -7.4% -6.4% -7.2% -6.4% -6.4% % Chg. Year/Year Bureau of Labor Statistics

Retail Series with Latest Data for August

5-year 1-year 6-month 3-month June July August Unit Source

Retail Inventory/Sales Ratio

Clothing and Clothing Accessory Stores 2.8 3.0 3.6 2.7 2.9 2.8 2.7 Ratio Department of Commerce

Department Stores 2.2 2.2 2.2 2.2 2.2 2.1 2.2 Ratio Department of Commerce

Recent Averages Values in Recent Quarters

Recent Averages Values in Recent Months







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Executive Cotton UpdateDaily Cotton Price and Currency Data

November 2020

Daily Cotton Price Data

5-year 1-year 6-month 3-month August September October Unit Source

NY Nearby 69.1 70.5 68.6 66.8 63.6 64.6 69.2 cents/pound ICE

A Index 78.1 79.8 77.8 76.0 70.0 70.8 74.8 cents/pound Cotlook

Daily Currency Data

5-year 1-year 6-month 3-month August September October Unit Source

Dollar Trade Weighted Exchange Index 114.3 115.0 118.6 116.7 118.0 116.5 115.6 Index, January 1997=100 Federal Reserve

Asian Currencies

Chinese Renminbi 6.76 6.81 6.95 6.84 6.96 6.85 6.71 Chinese Renminbi/US dollar Reuters

Indian Rupee 68.74 70.42 74.63 73.87 74.93 73.55 73.15 Indian Rupee/US dollar Reuters

Japanese Yen 109.90 109.10 106.53 105.93 105.89 106.24 105.66 Japanese Yen/US dollar Reuters

Pakistani Rupee 126.41 140.79 164.75 166.04 167.85 166.45 163.83 Pakistani Rupee/US dollar Reuters

North & South American Currencies

Brazilian Real 3.81 4.10 5.37 5.42 5.44 5.30 5.53 Brazilian Real/US dollar Reuters

Canadian Dollar 1.32 1.32 1.34 1.32 1.34 1.32 1.31 Canadian dollar/US dollar Reuters

Mexican Peso 19.40 19.90 22.21 21.74 22.51 21.51 21.19 Mexican Peso/US dollar Reuters

European Currencies

British Pound 0.76 0.77 0.78 0.77 0.77 0.77 0.77 British Pound/US dollar Reuters

Euro 0.88 0.87 0.87 0.85 0.85 0.85 0.85 Euro/US dollar Reuters

Swiss Franc 0.98 0.98 0.93 0.91 0.91 0.91 0.91 Swiss Franc/US dollar Reuters

Turkish Lira 4.67 5.60 7.23 7.53 7.24 7.49 7.86 Turkish Lira/US dollar Reuters

Recent Averages Averages over Recent Months

Recent Averages Averages over Recent Months

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March 4, 2009

Seasonally Adjusted Annual Rate; Source: Department of Commerce

*Based on chained 2005$.

Source: Federal Reserve

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-40

-30

-20

-10

0

10

20

30

40

10:Q4 11:Q4 12:Q4 13:Q4 14:Q4 15:Q4 16:Q4 17:Q4 18:Q4 19:Q4

Growth in U.S. Real Gross Domestic Product

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3

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6

7

8

Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19

Perc

ent

U.S. Interest Rates

Federal Funds 10 Year Treasury Bill

% Chg from Previous Quarter

Source: Institute for Supply Chain Management

Source: Institute for Supply Chain Management

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Index V

alu

es o

ver

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ndic

ate

Expansio

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ISM Index of Non-Manufacturing Activity

Service Sector Activity Service Sector Employment

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Index V

alu

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ver

50 I

ndic

ate

Expansio

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ISM Index of Manufacturing Activity

Manufacturing Activity Manufacturing Employment

Source: The Conference Board

Source: The Conference Board

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20

40

60

80

100

120

140


Index (

1985 =

100)

U.S. Consumer Confidence

60

70

80

90

100

110

120


Index (

2004 =

100)

U.S. Leading Economic Indicators

Source: Bureau of Labor Statistics


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3

4

5

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9

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11

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16


Perc

ent

U.S. Unemployment Rate

-25000

-20000

-15000

-10000

-5000

0

5000

10000


Change in U.S. Civilian Employment


Seasonally Adjusted Annual Rate; Source: National Association of Realtors

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3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

Mill

ion

Un

its

U.S. Existing Home Sales

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8


Mill

ion

Un

its

U.S. Housing Starts

Source: Federal Reserve. Historical data revised to 1997 baseline.

Seasonally Adjusted; Source: Department of Commerce

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-30%

-20%

-10%

0%

10%

20%

30%

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

% C

hange f

rom

Year

Ago

U.S. Industrial Production - Overall & Textile

Total Textiles

1.0

1.2

1.4

1.6

1.8


Ra

tio

U.S. Textile Mill Inventory to Shipments Ratio

Seasonally Adjusted Annual Rate

Source: USDA ERS


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0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

4.0

4.4

Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19

Mill

ion B

ale

s

US Cotton Yarn Exports

80

90

100

110

120

130

Oct-10 Sep-11 Aug-12 Jul-13 Jun-14 May-15 Apr-16 Mar-17 Feb-18 Jan-19 Dec-19

De

ce

mb

er

19

89

=1

00

Polyester Fiber Producer's Price Index





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-20%

-15%

-10%

-5%

0%

5%

10%

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

% C

hange f

rom

Year

Ago

U.S. Real Consumer Spending - All Goods & Services

-50%

-40%

-30%

-20%

-10%

0%

10%


% C

hange f

rom

Year

Ago

U.S. Real Consumer Spending on Clothing

Seasonally Adjusted; Source: Department of Commerce

Source: Department of Commerce


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-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

% C

hange f

rom

Year

Ago

U.S. Consumer Price Indices - Overall & Apparel

Overall Apparel

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0


Ra

tio

U.S. Retail Inventory to Sales Ratios

Department Stores Apparel/Accessory Stores

Source: Federal Reserve

Source: Reuters

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60

80

100

120

140

Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 May-20 Nov-20

Curr

ent

Month

5 Y

ears

Ago =

100

Asian Currencies vs. U.S. Dollar

Pakistani Rupee Indian Rupee Japanese Yen Chinese Renminbi

90

100

110

120


Trade Weighted Exchange Index for U.S. Dollar

Curr

ent

Month

5 Y

ears

ago =

100

Source: Reuters

Source: Reuters

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20

40

60

80

100

120

140

160


Cu

rre

nt M

on

th 5

Ye

ars

Ag

o =

10

0

Index of European Currencies vs. U.S. Dollar

Euro Turkish Lira Swiss Franc British Pound

30

50

70

90

110

130


Cu

rre

nt M

on

th F

ive

Ye

ars

Ag

o

= 1

00

North & South American Currencies vs.U.S. Dollar

Mexican Peso Brazilian Real Canadian Dollar

U.S. Balance Sheetmillion 480 lb. bales 2016/17 2017/18 2018/19 2019/20 2020/21 2020/21

September October

Beginning Stocks 3.8 2.8 4.2 4.9 7.3 7.3

Production 17.2 20.9 18.4 19.9 17.1 17.0

Imports 0.0 0.0 0.0 0.0 0.0 0.0

Supply 21.0 23.7 22.6 24.8 24.3 24.3

Mill-Use 3.3 3.2 3.0 2.2 2.5 2.5

Exports 14.9 16.3 14.8 15.5 14.6 14.6

Demand 18.2 19.5 17.8 17.7 17.1 17.1

Ending Stocks 2.8 4.2 4.9 7.3 7.2 7.2

Stocks/Use Ratio 15.1% 21.5% 27.2% 41.0% 42.1% 42.1%

Sources: ICE Futures U.S. & Cotton Outlook

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45

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Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20

Ce

nts

Per

Pou

nd

Year of Daily Cotton Prices

A Index NY Nearby

executive cotton update - cottonworks

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