US Cotton Market Clouded by Inflation and Interest-Rate Uncertainty
The US cotton market is facing uncertainty due to high inflation and interest-rate fluctuations. According to Cotton Incorporated's September Executive Cotton Update, inflation remains above the Federal Reserve's target of 2%.
Inflation-adjusted US spending on garments increased by 2.8% year-over-year in July, but this growth rate was below the recent 12-month average of 5.2%. However, cotton-dominant apparel imports weakened, with import volumes falling 11.4% year-over-year in July.
The average import cost of cotton-dominant apparel remained unchanged from June at $3.71 per square meter equivalent (SME), but this is about 12% above pre-pandemic levels. The labour market remains relatively firm, with the US economy adding 162,000 jobs in August, its strongest monthly gain since May.
The Federal Reserve's decision on monetary policy could further influence sourcing and purchasing decisions. The core personal consumption expenditures price index has remained near 3.3% since March, well above the central bank's target.