Average import costs for cotton-dominant apparel, represented by the price per square metre equivalent (SME), decreased by 1.6 per cent month-over-month in May (seasonally-adjusted). Year-over-year, import prices saw a drop of 6.3 per cent in May. Compared to the post-COVID peak in November 2022, the latest value is 13.1 per cent lower. However, relative to the average in 2019 (pre-COVID), sourcing costs for cotton-dominant apparel in May were 7.3 per cent higher.

The Conference Board’s Index of Consumer Confidence remained relatively stable in June in the US, dipping slightly from 101.3 in May to 100.4. The index continues to linger below the mid-point of the 95 to 115 range that has characterised its values since the latter half of 2021. The long-term average for the index hovers around 93.0, as noted in Cotton Incorporated's Executive Cotton Update - US Macroeconomic Indicators & the Cotton Supply Chain, July 2024.

Inflation-adjusted consumer spending overall increased by 0.3 per cent month-over-month in May. Year-over-year, spending was up by 2.4 per cent, slightly above the average annual growth rate of 2.3 per cent over the past year. After three consecutive months of decline, consumer spending on apparel rebounded with a 1.2 per cent increase month-over-month in May, marking a 2.6 per cent rise year-over-year.

The US labour market shows signs of slowing. Although job growth in June exceeded expectations with 206,000 new jobs added, revisions to April and May figures resulted in a downward adjustment of over 100,000 positions. The unemployment rate slightly increased from 4.0 per cent to 4.1 per cent month-over-month in June, continuing an upward trend that began in early 2023. Wage growth also decelerated, with a 3.9 per cent year-over-year increase in June, down from the post-stimulus peak of 5.9 per cent in March 2022.

Recent readings on inflation indicate a slowdown in price increases. The core price deflator, closely monitored by the Federal Reserve, dropped to 2.6 per cent year-over-year in May, edging closer to the central bank’s target of two per cent. This is a significant decrease from the 4.0 per cent reading a year ago and the peak of 7.1 per cent in June 2022.

With unemployment rising and inflation slowing, there is renewed speculation about potential interest rate cuts in the coming months. The Federal Reserve’s Open Market Committee is set to meet at the end of July, with another meeting scheduled for September. Projections from Federal Reserve officials suggest the possibility of one or two rate cuts in 2024, although sustained reductions in inflation remain a priority.

By Fibre2Fashion
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