Where Industry and Security Intersect
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This chapter examines the health and competitiveness of the U.S. textile and apparel industries at both the macro- and micro-economic levels. It first provides an overview of the current state of the industries by discussing the main products, the demand trends, and the global and U.S. markets. Next, the chapter assesses the health of the U.S. textile and apparel industries using various relevant industry indicators, including key financial metrics, trends in output, employment, prices, and production capacity. Finally, the chapter compares these U.S. industries with their international counterparts in several key areas to gauge the U.S. industries’ competitiveness.
The analysis uses data from public sources, including the U.S. DOC’s Bureau of Economic Analysis and Bureau of the Census and the U.S. Department of Labor’s Bureau of Labor Statistics. The analysis also relies on data collected through the DOC/BIS Survey Questions for Industry.
For purposes of this assessment, the U.S. textile and apparel industries together are comprised of four major segments, as defined by the Office of Management and Budget under the North American Industry Classification System (NAICS):
This section reviews the current state of each of these industries and their major sub-product groups. To put the performance of these industries in context, Table I-1 presents figures for growth in overall national gross domestic product (GDP), retail sales, and industrial production for 1997 through 2002.
Table I-1. Change in Relevant U.S. Economic Figures
|
||||||
| 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | |
|---|---|---|---|---|---|---|
| GDP | 4.4 | 4.3 | 4.11 | 3.75 | 0.25 | 2.45 |
| Retail Sales | 4.6 | 5.0 | 8.4 | 6.7 | 2.8 | 2.8 |
| Industrial Output | 7.3 | 5.6 | 4.3 | 4.7 | -3.5 | -0.7 |
Overall, as described in greater detail below, the analysis suggests that there is substantial variation in the status of the different sectors. The analysis also discusses, in separate subsections, trends in end uses (away from apparel manufacturing and towards industrial applications) and trends in U.S. exports and imports relative to consumption (showing imports as a growing percentage of U.S. apparent consumption).
The U.S. textile industry includes firms that transform basic fibers such as cotton, wool, and polyesters into products such as yarn, fabric, and thread that are further manufactured into end-use items such as apparel, sheets, bags, or industrial items. Three broad categories describe the scores of products and processes these industries encompass, as seen in Table I-2: (1) fiber, yarn, and thread mills; (2) fabric mills; and (3) finishing and coating mills.
As shown in Table I-2, total shipments from textile mills declined from approximately $49.8 billion in 1997 to approximately $38.5 billion in 2001. The largest activity based on value of shipments is fabric forming, comprising 58 percent of basic textile production in the United States in 2001. Spinning, yarn throwing, and thread production comprise 26 percent of the shipment value in basic textile production in 2001. Finally, 15 percent of the industry (based on value-added only) engages in textile finishing and coating.
All activities within the three main textile sectors recorded declines in the value of shipments over the period 1997-2001. The decline in these sectors preceded that of the general U.S. economy, which began to retrench in 1999. As explained later in this report, a decline in demand for textiles (by apparel producers in particular) and rising textile imports are commonly cited as significant factors affecting U.S. production of textiles. For example, there was a severe decline in apparel construction shipments, contributing in turn to substantial declines in demand for thread (by 47 percent) and knit fabrics (by 44 percent) during the 1997-2001 period. Spinning, yarn throwing, thread shipments, and fabric forming declined by 22 percent, close to the industry average of 23 percent, while finishing and coating activities declined by 14 percent. However, within the three major categories considerable variation in performance is evident. Thread shipments declined by an average of 47 percent or more than double the industry average. Following closely behind the trend in thread shipments, knit fabric mill shipments declined by 44 percent -- almost double the industry average. In contrast, narrow fabric and non-woven fabric shipments expanded slightly based on value.
Table I-2. U.S. Shipments of Textiles 1997-2001
|
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | Percent Change 1997-2001 |
|---|---|---|---|---|---|---|---|
| 31311 | Fiber, Yarn, and Thread Mills | 12,897 | 12,669 | 11,904 | 11,334 | 10,030 | -22% |
| 313111 | Spinning | 8,143 | 7,943 | 7,216 | 6,374 | 5,720 | -30% |
| 313112 | Yarn Throwing | 4,232 | 4,123 | 4,376 | 4,586 | 4,033 | -5% |
| 313113 | Thread | 522 | 603 | 311 | 374 | 278 | -47% |
| 3132 | Fabric Mills | 29,980 | 29,688 | 27,900 | 26,410 | 22,604 | -25% |
| 31321 | Broad Woven | 18,269 | 18,306 | 16,655 | 15,562 | 13,295 | -27% |
| 31322 | Narrow Fabric | 1,646 | 1,711 | 1,834 | 1,759 | 1,724 | 5% |
| 31323 | Non-Woven Fabric | 4,368 | 4,416 | 4,674 | 4,873 | 4,407 | 1% |
| 31324 | Knit Fabrics | 5,697 | 5,255 | 4,737 | 4,216 | 3,179 | -44% |
| 3133 | Finishing and Coating Mills* | 6,896 | 6,554 | 6,245 | 6,326 | 5,905 | -14% |
| Total | 49,773 | 48,911 | 46,049 | 44,070 | 38,540 | -23% | |
|
Source: U.S. Department of Commerce, Annual Survey
of Manufactures |
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Textile product mills utilize yarn, fabric, and thread for the manufacture of end-use products. These are differentiated from apparel products (NAICS 315) because they are not worn and are frequently produced in vertically integrated operations. Some cutting and sewing may be required. Textile mills fall into two major groups: (1) textile furnishings mills (home furnishings), which comprised two-thirds of the shipments; and (2) other textile product mills (general industrial products) (see Table I-3).
Table I-3. U.S. Shipments of Products from Textile Mills 1997-2001
|
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | Percent Change 1997-2001 |
|---|---|---|---|---|---|---|---|
| 3141 | Textile Furnishings Mills |
20,296 |
20,658 |
21,119 |
22,436 |
21,793 |
7% |
| 31411 |
Carpet and Rugs | 11,493 | 12,070 | 11,686 | 12,748 | 12,659 | 10% |
| 31412 | Curtains, Linens and Household Products | 8,803 | 8,588 | 9,433 | 9,688 | 9,134 | 4% |
|
|
|||||||
| 3149 |
Other Textile Product Mills |
10,756 |
10,479 |
11,570 |
11,219 |
10,178 |
-5% |
| 31491 |
Textile Bags and Canvas |
2,502 |
2,516 |
2,606 |
2,598 |
2,464 |
-2% |
| 314991 |
Rope, Cordage and Twine |
777 |
766 |
804 |
821 |
809 |
4% |
| 314992 |
Tire Cordage and Tire Fabric |
1,269 |
1,300 |
1,428 |
1,479 |
1,038 |
-18% |
| 314999 |
Products not listed elsewhere |
6,208 |
5,897 |
6,732 |
6,321 |
5,867 |
-5% |
|
Total |
31,052 |
31,137 | 32,689 | 33,654 | 31,971 | 3% | |
|
Source: U.S. Department of Commerce, Annual Survey of Manufactures |
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Total shipments of textile mill products rose during the 1997-2001 period to about $32 billion, up from approximately $31.1 billion in 1997, with the principal area of growth being textile furnishings mills. Shipments of the major home products groups (carpets, rugs, curtains, linens, and house products) grew seven percent over the 1997-2001 period. The slight decline in shipments in 2001 was due, in part, to the general downturn suffered by most of the U.S. consumer sector.
In contrast to the growth in the furnishings mills, shipments of other textile product mills declined by five percent overall. Shipments of tire cordage declined by 18 percent over the 1997-2001 period, and shipments of textile bags and canvas also fell by two percent. Only the rope, cordage, and twine subsector grew over the period.
Activities in the apparel manufacturing subsector comprise two distinct manufacturing
processes: (1) cut and sew (i.e., purchasing fabric and cutting and sewing
it to make a garment) and (2) the manufacture of garments in establishments
that first knit fabric and then sew the fabric into a garment.
The apparel manufacturing subsector includes a diverse range of establishments
manufacturing full lines of ready-to-wear and custom apparel. Examples of
subsector manufacturing include: apparel contractors performing cutting or
sewing operations on materials owned by others; jobbers performing entrepreneurial
functions involved in apparel manufacture; and tailors manufacturing custom
garments for individual clients. Knitting, when done alone, is classified
in the textile mills subsector, but when combined with the production of complete
garments, is classified as apparel manufacturing.
Table I-4. U.S. Shipments of Apparel 1997- 2001
|
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | Percent Change 1997-2001 |
|---|---|---|---|---|---|---|---|
| 315 | Apparel Mfg. | 68,018 | 64,932 | 62,305 | 60,339 | 54,598 | -20% |
| 3151 | Apparel From Knitting Mills | 9,601 | 8,526 | 7,669 | 7,569 | 6,838 | -29% |
| 3152 | Cut and Sew Apparel Mfg. |
53,852 |
51,574 | 50,332 | 48,413 | 43,563 | -19% |
|
Source: U.S. Department of Commerce, Annual Survey of Manufactures |
|||||||
U.S. apparel shipments experienced a decline of 20 percent during the 1997-2001 period (see Table I-4). Shipments of apparel from knitting mills fell 29 percent over the period, while shipments from cut and sew establishments fell 19 percent.
Industry data in Figure I-1 shows the decline in the pounds of fiber consumed by the apparel industry. Figure I-1 also shows that the current decline in production began in 1995 and has continued unbroken.
More than 50 percent of U.S. apparel shipments are concentrated in three areas: the production of men’s, boys’, women’s, and girls’ trousers (29 percent); men’s and boys’ knit sport shirts (13 percent); and children’s, girls’, and infants’ apparel (12 percent).
Figure I-1. Consumption of Fiber by U.S. Apparel Industry,
1994-2001
(Millions of pounds)
Source: Cotton Counts its Customers, All Fibers
The U.S. footwear manufacturing industry is broken down into five categories: rubber and plastics footwear; house slippers; men’s footwear; women’s footwear; and other footwear. Rubber and plastics footwear includes manufacturers who produce footwear that has rubber or plastic soles with rubber, plastic or fabric uppers, as well as rubber and plastics protective footwear. House slipper manufacturing includes all house slippers and slipper socks, regardless of material. Men’s and women’s footwear is comprised of all footwear that is primarily designed for dress, street, and work. This includes all shoes with rubber or plastic soles and leather or vinyl uppers, except athletic shoes, which are classified under other footwear or rubber and plastics footwear if they have a fabric upper.
Table I-5. U.S. Shipments of Footwear 1997-2001
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | Percent Change 1997-2001 |
|---|---|---|---|---|---|---|---|
| 3162 | Footwear Manufacturing | 4,211 | 3,764 | 3,797 | 3,760 | 3,511 | -17% |
| 316211 | Rubber and Plastics Footwear | 1,010 | 1,130 | 1,023 | 977 | 963 | -5% |
| 316212 | House Slippers | 264 | 235 | 248 | 254 | 205 | -22% |
| 316213 | Men’s Footwear (except Athletic) | 2,020 | 1,692 | 1,829 | 2,022 | 1,942 | -4% |
| 316214 | Women’s Footwear (except Athletic) | 704 | 506 | 516 | 369 | 303 | -57% |
| 316219 | Other Footwear | 214 | 201 | 181 | 139 | 98 | -54% |
|
Source: U.S. Department of Commerce, Annual Survey of Manufactures |
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In the U.S. footwear manufacturing industry, men’s footwear comprised 55 percent of all shipments in 2001 (see Table I-5). This was followed by rubber and plastics footwear which made up 27 percent. Women’s footwear has substantially decreased in shipments, declining from $704 million in shipments in 1997 to $303 million in shipments in 2001. This represents a reduction of 57 percent in shipments over five years. The average change for all footwear manufacturing from 1997 to 2001 was a decline of 17 percent. In 2001, footwear shipments totaled only $3.5 billion.
With declines in U.S. apparel shipments, the composition of textile production in the United States has shifted away from fabrics for use in apparel to fabrics for use in home furnishing applications and other industrial uses. As shown in Figure I-2, 1994 apparel production consumed more than double the textiles used to produce industrial goods. By 2001, textile consumption by U.S. apparel firms had declined almost to the level of textiles demanded by industrial producers, whose consumption of textiles increased only slightly, growing from 18 percent of fiber consumption to 20 percent in 2001. The share of textile consumption for home furnishings increased from 46 percent in 1994 to 52 percent in 2001.
Figure I-2. Demand for Textiles by End Use in the United
States, 1994-2001
(Millions of pounds)
Source: Cotton Counts its Customers
Table I-6 shows trends in shipments, imports, exports, apparent consumption, and imports as a percent of apparent consumption for spinning, yarn, and thread (NAICS 31311). While U.S. imports of thread and yarn first rose and then fell over the 1997-2001 period, imports as a percentage of apparent consumption rose steadily, as U.S. production generally declined. U.S. yarn imports increased by 17 percent, while imports of thread declined by 21 percent. The top five foreign sources of imported yarn and thread are: Canada ($100 million or 20 percent), Mexico ($87 million or 13 percent), Pakistan ($69 million or ten percent), Italy ($44 million or seven percent), and Thailand ($31 million or five percent). Exports of yarn and thread grew over the period.
Table I-6. U.S. Shipments, Imports, Exports and Apparent Consumption,
|
||||||||
| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | Percent Change 1997-2001 |
|---|---|---|---|---|---|---|---|---|
| U.S. Shipments | ||||||||
| 31311 | Spinning, Yarn, and Thread | 12,897 | 12,669 | 11,904 | 11,334 | 10,030 | N/A | -22% |
| 313111 | Yarn/Spinning | 8,143 | 7,943 | 7,216 | 6,374 | 5,720 | N/A | -30% |
| 313112 | Yarn Throwing | 4,232 | 4,123 | 4,376 | 4,586 | 4,033 | N/A | -5% |
| 313113 | Thread | 522 | 603 | 311 | 374 | 278 | N/A | -47% |
| U.S. Imports (CIF-Cost, Insurance, and Freight) | ||||||||
| 31311 | Spinning, Yarn, and Thread | 601 | 649 | 716 | 805 | 701 | 670 | 17% |
| 313111 | Yarn/Spinning | 547 | 597 | 668 | 760 | 658 | 620 | 20% |
| 313112 | Yarn Throwing | - | - | - | - | - | - | - |
| 313113 | Thread | 54 | 52 | 47 | 45 | 42 | 50 | -21% |
| U.S. Exports (FAS-Free Along Side) | ||||||||
| 31311 | Spinning, Yarn, and Thread | 513 | 548 | 614 | 731 | 607 | 590 | 18% |
| 313111 | Yarn/Spinning | 358 | 347 | 372 | 415 | 409 | 423 | 14% |
| 313112 | Yarn Throwing | - | - | - | - | - | - | - |
| 313113 | Thread | 155 | 201 | 242 | 315 | 198 | 167 | 28% |
| U.S. Apparent Consumption | ||||||||
| 31311 | Spinning, Yarn, and Thread | 12,985 | 12,770 | 12,005 | 11,409 | 10,124 | N/A | -22% |
| 313111 | Yarn/Spinning | 8,332 | 8,194 | 7,512 | 6,718 | 5,969 | N/A | -28% |
| 313112 | Yarn Throwing | - | - | - | - | - | - | - |
| 313113 | Thread | 421 | 453 | 116 | 105 | 122 | N/A | -71% |
| Imports as a Percent of Apparent Consumption | ||||||||
| 31311 | Spinning, Yarn, and Thread | 5% | 5% | 6% | 7% | 7% | N/A | 50% |
| 313111 | Yarn/Spinning | 7% | 7% | 9% | 11% | 11% | N/A | 68% |
| 313112 | Yarn Throwing | - | - | - | - | - | - | - |
| 313113 | Thread | 13% | 11% | 41% | 43% | 35% | N/A | 172% |
|
Source: U.S. Department of Commerce, Annual Survey of Manufactures |
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Table I-7 illustrates U.S. shipments, imports, exports, apparent consumption, and imports as a percent of apparent consumption of textile fabrics for 1997-2002. While apparent U.S. consumption of fabric declined 29 percent over the 1997-2001 period and shipments of fabric have declined by 25 percent, imports have remained relatively steady, declining only three percent. The net result of declining U.S. shipments and steady imports of textile fabric has been a rise in the penetration of imports into the U.S. market.
Table I-8. U.S. Shipments, Imports, Exports, and Apparent Consumption
1997- 2002
|
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | Change 1997-2001 |
|---|---|---|---|---|---|---|---|---|
| U.S. Shipments | ||||||||
| 3132 | Fabric (Weaving and Knitting) |
29,980 | 29,688 | 27,900 | 26,410 | 22,604 | N/A | -25% |
| 31321 | Broadwoven | 18,269 | 18,306 | 16,655 | 15,562 | 13,295 | N/A | -27% |
| 31322 | Narrow Fabric | 1,646 | 1,711 | 1,834 | 1,759 | 1,724 | N/A | 5% |
| 31323 | Non-Woven Fabric | 4,368 | 4,416 | 4,674 | 4,873 | 4,407 | N/A | 1% |
| 31324 | Knit Fabrics | 5,697 | 5,255 | 4,737 | 4,216 | 3,179 | N/A | -44% |
| U.S. Imports (CIF-Cost, Insurance, and Freight) | ||||||||
| 3132 | Fabric (Weaving and Knitting) |
5,315 | 5,367 | 5,282 | 5,714 | 5,151 | 5,531 | -3% |
| 31321 | Broadwoven | 3,905 | 3,907 | 3,659 | 3,896 | 3,338 | 3,559 | -15% |
| 31322 | Narrow Fabric | 341 | 374 | 394 | 439 | 407 | 442 | 19% |
| 31323 | Non-Woven Fabric | 265 | 277 | 286 | 355 | 372 | 422 | 40% |
| 31324 | Knit Fabrics | 804 | 810 | 944 | 1,025 | 1,034 | 1,107 | 29% |
| U.S. Exports (FAS-Free Along Side) | ||||||||
| 3132 | Fabric (Weaving and Knitting) |
4,369 | 4,378 | 4,680 | 5,635 | 5,715 | 6,033 | 31% |
| 31321 | Broadwoven | 2,388 | 2,425 | 2,683 | 3,315 | 3,237 | 3,301 | 36% |
| 31322 | Narrow Fabric | 538 | 551 | 660 | 728 | 749 | 769 | 39% |
| 31323 | Non-Woven Fabric | 769 | 733 | 674 | 761 | 757 | 822 | -2% |
| U.S. Apparent Consumption | ||||||||
| 3132 | Fabric (Weaving and Knitting) |
30,926 | 30,677 | 28,503 | 26,489 | 22,040 | N/A | -29% |
| 31321 | Broadwoven | 19,787 | 19,787 | 17,630 | 16,143 | 13,397 | N/A | -32% |
| 31322 | Narrow Fabric | 1,449 | 1,534 | 1,568 | 1,470 | 1,382 | N/A | -5% |
| 31323 | Non-Woven Fabric | 3,864 | 3,959 | 4,286 | 4,466 | 4,022 | N/A | 4% |
| 31324 | Knit Fabrics | 5,826 | 5,396 | 5,019 | 4,410 | 3,240 | N/A | -44% |
| Imports as a Percent of Apparent Consumption | ||||||||
| 3132 | Fabric (Weaving and Knitting) |
17% |
17% |
19% |
22% |
23% | N/A | 36% |
| 31321 | Broadwoven | 20% | 20% | 21% | 24% | 25% | N/A | 26% |
| 31322 | Narrow Fabric | 24% | 24% | 25% | 30% | 29% | N/A | 25% |
| 31323 | Non-Woven Fabric | 7% | 7% | 7% | 8% | 9% | N/A | 35% |
| 31324 | Knit Fabrics | 14% | 15% | 19% | 23% | 32% | N/A | 131% |
|
Source: U.S. Department of Commerce Annual Survey
of Manufactures, and U.S. Imports and Exports of Merchandise Trade |
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As illustrated in Table I-7, considerable variation in U.S. shipments exists between the major fabric sub-groups. Large declines were seen in shipments of broad woven and knit fabrics (27 percent and 44 percent respectively), compared with narrow fabrics and non-wovens, where shipments increased by five percent and one percent, respectively. The top five import sources for fabric are: Canada ($800 million or 14 percent); South Korea ($600 million or 11 percent); Italy ($500 million or nine percent); Taiwan ($400 million or seven percent); and China ($400 million or seven percent).
As shown in Table I-8, U.S. shipments of products from textile furnishing mills (home furnishings) grew by seven percent between 1997 and 2001, while shipments from other textile product mills (industrial applications) declined modestly (by five percent), about one-third the rate for fabrics and yarns. Imports of home furnishings and industrial textiles increased over the period.
The top five sources of U.S. imports of home furnishings are: China ($1.5 billion or 26 percent); India ($1 billion or 16 percent); Pakistan ($700 million or 11 percent); Mexico ($400 million or seven percent); and Canada ($300 million or five percent). The top five sources of U.S. imports of industrial textiles are: China ($900 million or 34 percent); Mexico ($400 million or 16 percent); Canada ($200 million or nine percent); South Korea ($100 million or five percent); and Taiwan ($100 million or four percent).
Table I-8. U.S. Shipments, Imports, Exports, and Apparent Consumption
1997- 2002
|
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | Change 1997-2001 |
|---|---|---|---|---|---|---|---|---|
| U.S. Shipments | ||||||||
| 3141 | Textile Furn. Mills | 20,296 | 20,658 | 21,119 | 22,436 | 21,793 | N/A | 7% |
| 31411 | Carpets and Rugs | 11,493 | 12,070 | 11,686 | 12,748 | 12,659 | N/A | 10% |
| 31412 | Curtains and Linens | 8,803 | 8,588 | 9,433 | 9,688 | 9,134 | N/A | 4% |
| 3149 | Other Products of Textile Mills | 10,756 | 10,479 | 11,570 | 11,219 | 10,178 | N/A | -5% |
| 31491 | Textile Bags and Canvas | 2,502 | 2,516 | 2,606 | 2,598 | 2,464 | N/A | -2% |
| 314991 | Rope, Cordage, and Twine | 777 | 766 | 804 | 821 | 809 | N/A | 4% |
| 314992 | Tire Cordage and Tire Fabric | 1,269 | 1,300 | 1,428 | 1,479 | 1,038 | N/A | -18% |
| U.S. Imports (CIF-Cost, Insurance, and Freight) | ||||||||
| 3141 | Textile Furn. Mills | 2,985 | 3,613 | 4,185 | 5,018 | 5,089 | 6,089 | 70% |
| 31411 | Carpets and Rugs | 961 | 1,109 | 1,1248 | 1,464 | 1,410 | 1,531 | 47% |
| 31412 | Curtains and Linens | 2,024 | 2,504 | 2,937 | 3,554 | 3,679 | 4,558 | 82% |
| 3149 | Other Products of Textile Mills | 767 | 826 | 839 | 901 | 931 | 1,021 | 21% |
| 31491 | Textile Bags and Canvas | 342 | 387 | 410 | 438 | 462 | 503 | 35% |
| 314991 | Rope, Cordage, and Twine | 223 | 229 | 220 | 249 | 259 | 270 | 17% |
| 314992 | Tire Cordage and Tire Fabric | 202 | 210 | 208 | 214 | 210 | 247 | 4% |
| U.S. Exports (FAS-Free Along Side) | ||||||||
| 3141 | Textile Furn. Mills | 1,297 | 1,295 | 1,197 | 1,246 | 1,151 | 1,085 | -11% |
| 31411 | Carpets and Rugs | 858 | 826 | 772 | 791 | 711 | 684 | -17% |
| 31412 | Curtains and Linens | 439 | 469 | 425 | 455 | 441 | 401 | 0% |
| 3149 | Other Products of Textile Mills | 299 | 310 | 310 | 308 | 285 | 288 | -5% |
| 31491 | Textile Bags and Canvas | 76 | 81 | 79 | 73 | 71 | 77 | -7% |
| 314991 | Rope, Cordage, and Twine | 63 | 75 | 69 | 78 | 81 | 86 | 28% |
| 314992 | Tire Cordage and Tire Fabric | 159 | 154 | 162 | 158 | 133 | 126 | -16% |
| U.S. Apparent Consumption | ||||||||
| 3141 | Textile Furn. Mills | 21,984 | 22,976 | 24,106 | 26,208 | 25,731 | N/A | 17% |
| 31411 | Carpets and Rugs | 11,596 | 12,353 | 12,162 | 13,421 | 13,358 | N/A | 15% |
| 31412 | Curtains and Linens | 10,388 | 10,623 | 11,944 | 12,787 | 12,373 | N/A | 19% |
| 3149 | Other Products of Textile Mills | 5,016 | 5,098 | 5,367 | 5,490 | 4,956 | N/A | -1% |
| 31491 | Textile Bags and Canvas | 2,768 | 2,822 | 2,937 | 2,962 | 2,854 | N/A | 3% |
| 314991 | Rope, Cordage, and Twine | 936 | 920 | 956 | 992 | 987 | N/A | 5% |
| 314992 | Tire Cordage and Tire Fabric | 1,312 | 1,357 | 1,474 | 1,536 | 1,115 | N/A | -15% |
| Imports as a Percent of Apparent Consumption | ||||||||
| 3141 | Textile Furn. Mills | 14% | 16% | 17% | 19% | 20% | N/A | 46% |
| 31411 | Carpets and Rugs | 8% | 9% | 10% | 11% | 11 | N/A | 27% |
| 31412 | Curtains and Linens | 19% | 24 | 25% | 28 | 30% | N/A | 53% |
| 3149 | Other Products of Textile Mills | 15% | 16 | 16% | 16 | 19% | N/A | 23% |
| 31491 | Textile Bags and Canvas | 12% | 14% | 14% | 15 | 16% | N/A | 31% |
| 314991 | Rope, Cordage, and Twine | 24% | 25% | 23 | 25% | 26% | N/A | 11% |
| 314992 | Tire Cordage and Tire Fabric | 15% | 16 | 14% | 14 | 19% | N/A | 22% |
|
Source: U.S. Department of Commerce Annual Survey
of Manufactures, and U.S. Imports and Exports of Merchandise Trade |
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Table I-9 provides data for U.S. shipments, imports, exports, apparent consumption, and imports as a percentage of apparent consumption for the apparel sector. U.S. shipments of apparel declined by 20 percent during 1997-2001, due largely to substantial drops in shipments from apparel knitting mills (decreasing $2.8 billion or 29 percent) and cut and sew apparel manufacturers (down almost $10.2 billion or 19 percent). At the same time, imports of products from apparel knitting mills and cut and sew apparel manufacturers grew during 1997-2001. The top five sources of U.S. imports of all apparel products in 2002 were: China ($9.3 billion or 15 percent of imports); Mexico ($7.7 billion or 12 percent); Hong Kong ($3.9 billion or 6.2 percent); Honduras ($2.5 billion or four percent); and the Dominican Republic ($2.2 billion or four percent).
Table I-9. U.S. Shipments, Imports, Exports, and Apparent Consumption
|
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| NAICS | Description | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | Change 1997-2001 |
|---|---|---|---|---|---|---|---|---|
| U.S. Shipments | ||||||||
| 315 | Apparel Mfg. |
68,018 | 64,932 | 62,305 | 60,339 | 54,598 | N/A | -20% |
| 3151 | Apparel Knitting Mills | 9,601 | 8,526 | 7,669 | 7,569 | 6,838 | N/A | -29% |
| 3152 | Cut and Sew Apparel Mfg. | 53,852 | 51,574 | 50,332 | 48,413 | 43,563 | N/A | -19% |
| 3159 | Accessories | 4,566 | 4,832 | 4,832 | 4,357 | 4,198 | N/A | -8% |
| U.S. Imports (CIF-Cost, Insurance, and Freight) | ||||||||
| 315 | Apparel Mfg. |
47,084 | 52,298 | 55,104 | 62,928 | 62,429 | 62,313 | 33% |
| 3151 | Apparel Knitting Mills | 560 | 680 | 844 | 946 | 919 | 1,027 | 64% |
| 3152 | Cut and Sew Apparel Mfg. | 43,765 | 48,746 | 51,282 | 58,417 | 57,923 | 57,686 | 32% |
| 3159 | Accessories | 2,759 | 2,872 | 2,978 | 3,564 | 3,587 | 3,599 | 30% |
| U.S. Exports (FAS-Free Along Side) | ||||||||
| 315 | Apparel Mfg. |
8,274 | 8,412 | 7,876 | 8,104 | 6,469 | 5,462 | -22% |
| 3151 | Apparel Knitting Mills | 353 | 417 | 445 | 423 | 363 | 344 | 3% |
| 3152 | Cut and Sew Apparel Mfg. | 6,361 | 6,141 | 6,012 | 6,260 | 4,894 | 4,067 | -23% |
| 3159 | Accessories | 1,560 | 1,855 | 1,418 | 1,420 | 1,213 | 1,050 | -22% |
| U.S. Apparent Consumption | ||||||||
| 315 | Apparel Mfg. |
106,827 | 108,818 | 109,533 | 115,163 | 110,558 | N/A | 3% |
| 3151 | Apparel Knitting Mills | 9,808 | 8,788 | 8,068 | 8,092 | 7,395 | N/A | -25% |
| 3152 | Cut and Sew Apparel Mfg. | 91,255 | 94,180 | 95,601 | 100,571 | 96,592 | N/A | 6% |
| 3159 | Accessories | 5,764 | 5,850 | 5,864 | 6,500 | 6,572 | N/A | 14% |
| Imports as a Percent of Apparent Consumption | ||||||||
| 315 | Apparel Mfg. |
44% | 48% | 50% | 55% | 56% | N/A | 28% |
| 3151 | Apparel Knitting Mills | 6% | 8% | 10% | 12% | 12% | N/A | 118% |
| 3152 | Cut and Sew Apparel Mfg. | 48% | 52 | 54% | 58 | 60% | N/A | 25% |
| 3159 | Accessories | 48% | 49 | 51% | 55 | 55% | N/A | 14 |
|
Source: U.S. Department of Commerce Annual Survey
of Manufactures, and U.S. Imports and Exports of Merchandise Trade |
||||||||
Table I-10 shows trends in shipments, imports, exports, apparent consumption, and imports as a percent of apparent consumption for footwear manufacturing (NAICS 3162). From 1997 to 2001, U.S. shipments of footwear decreased 17 percent. During the same time period, U.S. apparent consumption of footwear rose five percent. Imports as a percentage of apparent consumption rose from 78 percent to 83 percent, representing a six percent change over the five year period. Increases in imports account for the decreasing U.S. shipment values. Footwear is relatively labor intensive, and for the most part, does not require skilled labor, which makes it more cost effective to produce abroad.
Table I-10. U.S. Shipments, Import, Exports, and Apparent Consumption
of
|
||||||
| 1997 | 1998 | 1999 | 2000 | 2001 | Percent Change 1997-2001 | |
|---|---|---|---|---|---|---|
| U.S. Shipments |
4,211 | 3,764 | 3,797 | 3,760 | 3,511 | -17% |
| U.S. Imports | 13,372 | 13,345 | 13,628 | 14,497 | 14,890 | 11% |
| U.S. Exports | 465 | 422 | 391 | 360 | 364 | -22% |
| U.S Apparent Consumption | 17,118 | 16,687 | 17,034 | 17,897 | 18,037 | 5% |
| Imports as % of Apparent Consumption | 78% | 80% | 80% | 81% | 83% | 6% |
|
Source: U.S. Department of Commerce, Annual Survey
of Manufactures, and U.S. Imports and Exports of Merchandise Trade |
||||||
In this section, several measures are used to assess the health of the textile and apparel industries. First, we consider the economic well-being of the industries’ firms, measured here by the aggregate current profitability of the industries, their profitability outlook, and other financial measures. In addition to financial measures, this analysis will consider non-financial metrics of industry health, including employment and operating establishments, relative prices, capacity utilization, and productivity. The analysis suggests that there are significant differences between the textile and apparel industries, and between subsectors within each industry, on many of the metrics cited.
The three subsectors examined in this report -- apparel, textiles, and footwear -- represent the high-, low-, and mid-range of financial health when compared with all other consumer cyclical sectors. Table I-11 provides relevant statistics for all of the consumer cyclicals, as well as two groups of publicly traded, foreign-owned textile and apparel firms. The data underlying this section of the analysis are drawn from publicly available financial information sources. In section B.2, data collected through the BIS survey of textile and apparel firms are used as the basis for additional financial analysis.
Table I-11. Financial Ratios
|
||||||
| Gross Margin | Operating Margin | Profit Margin | Return on Assets | Long-term Debt/ Equity |
Sales/ Employee (avg. for industry) |
|
|---|---|---|---|---|---|---|
| U.S. Industries | ||||||
| Consumer Cyclical | ||||||
| Apparel/Accessories | 44.12 | 13.5 | 8.3 | 13.4 | 0.33 | $146.56 |
| Appliance/Tool | 30.42 | 7.3 | 4.2 | 5.2 | 2.94 | $180.62 |
| Audio/Video Equipment | 25.73 | 7.9 | 5.1 | -15.1 | 0.47 | $258.18 |
| Auto/Truck Manufacturing | 19.37 | 2.3 | 1.4 | 1.0 | 2.11 | $511.27 |
| Auto/Truck Parts | 21.88 | 7.9 | 4.8 | 5.9 | 0.65 | $186.74 |
| Footwear | 40.42 | 9.8 | 6.4 | 11.4 | 0.15 | $344.15 |
| Furniture/Fixtures | 30.31 | 9.5 | 5.3 | 6.6 | 0.57 | $145.59 |
| Jewelry/Silverware | 31.38 | 10.5 | 6.1 | 7.5 | 0.19 | $229.85 |
| Photography | 34.15 | 6.8 | 4.5 | 5.4 | 0.47 | $236.99 |
| Recreational Products | 40.68 | 16.1 | 10.3 | 12.7 | 0.27 | $262.08 |
| Textiles-Non-Apparel | 16.76 | 6.2 | 3.6 | 5.8 | 0.53 | $161.59 |
| Tires | 20.66 | 3.3 | -0.3 | 0.5 | 2.21 | $165.23 |
| Comparative Industries | ||||||
| Iron and Steel | 11.22 | 3.0 | 1.8 | 2.4 | 0.61 | $320.48 |
| Chemicals Manufacturing | 36.74 | 11.6 | 7.0 | 5.5 | 0.77 | $289.56 |
| Airlines | 25.94 | 4.5 | 3.7 | 3.3 | 1.94 | $179.81 |
| Aerospace/Defense | 15.99 | 4.8 | 2.3 | 2.5 | 0.91 | $237.42 |
| International Industries | ||||||
| International Textile | 20.7 | 5.9 | 3 | N/A | N/A | $325.00 |
| International Apparel | 38.7 | 8.9 | 5.4 | N/A | N/A | $181.00 |
| Source: Multex Investor Financial Services Data | ||||||
Gross margin is calculated by subtracting the cost of goods sold from net sales, then dividing by net sales. During the most recent 12-month reporting period, U.S. apparel firms generated the highest gross margins (44.12 percent) among the sectors examined here, surpassing the gross margins of international apparel firms (38.7 percent). The U.S. footwear sector also reported high gross margins (40.42 percent), surpassed only by the apparel sector and recreational products (40.68 percent) sector. The textile industry produced the lowest gross margins (16.76 percent) among the consumer cyclicals, and its gross margins were lower than those of foreign-owned textile firms (20.7 percent).
The next measure of profitability is the operating margin. This ratio is similar to the gross margin, but it includes the cost of labor, which accounts for a large share of total expenses, especially in labor-intensive industries. The apparel industry’s operating margins (13.46 percent) topped those of most other industries, with the exception of recreational products (16.14 percent). The textile industry was in the lower tier of industries examined with an operating margin of 6.18 percent. Only auto/truck manufacturing and tire manufacturing in the consumer cyclical sector reported lower percentages. International textile firms as a group reported even lower operating margins of 5.9 percent, according to company financial reports. Footwear producers generated operating margins of 9.8 percent, ranking in the mid-range among consumer cyclical industries.
Profit margin is the key profitability ratio. It captures non-operating expenses such as taxes and interest payments and represents the industry’s actual earnings. Again, the apparel industry ranked near the top of the sector, with a profit margin of 8.3 percent. It is second only to the recreational products industry (10.3 percent). Footwear producers, with a profit margin of 6.4 percent, ranked in the mid-range of consumer cyclical industries, and textiles (3.6 percent) ranked in the lowest tier of consumer cyclicals. Both the textile and apparel industries surpassed their foreign competitors in this key profitability metric, with a 0.6 percent and nearly 3.0 percent lead respectively. However, financial data for U.S. firms include earnings from foreign operations.
Return on assets (ROA) is an indicator of both profitability and efficiency. Industries that use their assets (such as capital equipment, plant facilities, and cash-on-hand) most efficiently will tend to generate higher ROAs than competing industries. With respect to this indicator, the apparel industry is the most efficient among consumer cyclicals with a ROA of 13.4 percent. Footwear producers also rank high with a ROA of 11.4 percent. The U.S. textile industry (5.8 percent) is the least healthy of the three industries discussed in this report. Nonetheless, the ROA of this industry segment exceeds those of the four non-consumer cyclical industries shown in Table I-11.
Long-term debt in relationship to stockholders’ equity is a measure of how well the industry is leveraged over the longer-term (usually more than one year). The higher the ratio, the more vulnerable the industry is to an extended downturn. The footwear industry’s debt (0.15 percent) is the lowest of all the industries examined in this report. With the exception of tire manufacturers and auto/truck makers, the textile industry has one of the higher levels of debt, but it is still small compared with those of the aerospace and airlines industries. Apparel producers’ average debt-to-equity ratio of 0.33 percent is in the mid-range of consumer cyclical industries.
Of the three industries examined for this report, the apparel industry ranks at or near the top of the consumer cyclical sector in terms of profitability and the efficient use of assets. The footwear industry ranks in the mid-range of the consumer cyclical sector in terms of most of the key financial metrics, and the industry maintains a low debt position. The textile industry ranks in the bottom tier of the consumer cyclical sector with a lower profit margin and above average debt. In the comparison of company financial reports, U.S. counterparts maintained higher levels of profitability than overseas manufacturers. Again, U.S. financial reporting includes earnings from foreign operations.
This section analyzes key financial metrics for approximately 500 U.S. textile-
and apparel-related firms that provided complete responses to the BIS Industry
Survey. These companies included not just textile and apparel product manufacturers,
wholesalers, and retailers, but also producers of related machinery and equipment,
dyes, and chemicals, as well as service providers, such as warehouse operations,
software developers, and logistics support.
Table I-12 shows the distribution of firms in the survey by firm size based
on 2002 sales. Most U.S. firms are small, as more than two-thirds of all firms
in the sample reported annual sales below $50 million. However, large firms
produce a significant share of total output: two percent of all responding
firms produce more than half of total output (measured by 2002 sales); 32
percent of responding firms, with annual sales exceeding $50 million, accounted
for 93 percent of the total 2002 sales in the sample.
Table I-12. Distribution by Sales of Survey Respondents |
||||
| Firm’s Annual 2002 Sales | Percent of Firms | Percent of 2002 Sales | ||
|---|---|---|---|---|
| Less than $50 million | 68% | 7% | ||
| Between $50M and $100M | 14% | 7% | ||
| Between $100M and $500M | 13% | 19% | ||
| Between $500M and $1B | 3% | 15% | ||
| Greater than $1B | 2% | 52% | ||
| Source: U.S. DOC/BIS Industry Survey Data | ||||
Table I-13 provides ratios for firms responding to the survey with annual sales exceeding $50 million and separate ratios for firms with annual sales below $50 million.
Table I-13. Financial Ratios: All Survey Respondents by Size |
||||
| 1999 | 2000 | 2001 | 2002 | |
|---|---|---|---|---|
| Gross Margin | ||||
| Sales > $50 million | 25.4% | 27.1% | 25.0% | 27.6% |
| Sales < $50 million | 22.2% | 22.9% | 22.0% | 23.4% |
| All Firms | 25.2% | 26.8% | 24.8% | 27.3% |
| Operating Margin | ||||
| Sales > $50 million | 6.5% | 7.9% | 5.3% | 7.0% |
| Sales < $50 million | 3.9% | 4.4% | 1.6% | 2.6% |
| All Firms | 6.3% | 7.6% | 5.1% | 6.7% |
| Inventory Processing Period (Days) | ||||
| Sales > $50 million | 81 | 86 | 76 | 75 |
| Sales < $50 million | 83 | 83 | 88 | 94 |
| All Firms | 84 | 90 | 79 | 79 |
| Capital Expenditures/Sales | ||||
| Sales > $50 million | 6.2% | 5.4% | 46% | 4.9% |
| Sales < $50 million | 4.2% | 3.2% | 3.0% | 2.6% |
| All Firms | 6.9% | 6.1% | 5.4% | 5.7% |
| Interest Coverage Ratio | ||||
| Sales > $50 million | Data not collected for 1999-2001 | 3.52 | ||
| Sales < $50 million | 13.10 | |||
| All Firms | 9.45 | |||
| Source: U.S. DOC/BIS Industry Survey Data | ||||
The data reveal that the gross and operating margins for large firms are higher than those for smaller firms. Typically, larger firms have some operating advantages over smaller firms in the same industry, with cost efficiencies gained through higher output. Firms of all sizes experienced a slight improvement in profitability between 2001 and 2002.
The inventory processing period for small firms increased in the 1999-2002 period. In contrast, the inventory processing period for large firms has improved substantially in the last few years, potentially indicating a focus on inventory management.
The survey data also indicate that larger firms consistently invest a larger percentage of sales back into the business than do smaller firms. For example, in 2002 firms with annual sales exceeding $50 million spent 4.9 percent of annual sales in capital expenditures, whereas firms with annual sales below $50 million spent only 2.6 percent of sales in capital expenditures. Additionally, large firms increased their investment rate from 4.6 percent in 2001 to 4.9 percent in 2002, whereas small firms reduced their investment rate from three percent in 2001 to 2.6 percent in 2002. Capital investment is an important factor related to health, and the declining rate of investment by small firms is a negative indicator.
The interest coverage ratio is an important metric, as it indicates the ability of firms to make interest payments on their outstanding debt. Based on survey data shown in Table I-13, the larger firms, with annual sales exceeding $50 million, have a low coverage ratio and more difficulty in meeting debt obligations. In contrast, smaller firms have a much higher interest coverage ratio, suggesting lower debt consumption, and are therefore more likely to make interest payments on their debt.
While profitability is seen as the key measure of industry health, other metrics can also serve as indicators of the well-being of an industry. These other metrics include employment and operating establishments, relative prices, and plant capacity and capacity utilization.
Figure I-3. U.S. Employment, Textile and Apparel Industries
(by Standard Industrial Classification)
(Thousands)
Source: U.S. Department of Labor, Bureau of Labor Statistics
B.3.a. Employment and Plant Closings
U.S. textile and apparel employment has declined significantly over time, as evidenced in Figure I-3. Employment in the textile industry peaked in 1950 at more than 1.2 million workers. Apparel employment peaked in the early 1970s at more than 1.4 million employees. Table I-14 provides detailed information about total manufacturing employment as well as employment in the textile and apparel industries.
In 1950, there were an estimated 15 million manufacturing workers (see Table I-14) in the United States, according to the U.S. Department of Labor. By 1980, manufacturing employment increased by 33 percent to 20 million workers. During this same period, textile employment decreased by 33 percent to about 848,000 workers, while apparel employment increased by five percent to 1.26 million workers. By 2002, total U.S. manufacturing employment declined to 16.7 million, still higher than the 1950 total. In contrast, by 2002 the number of textile workers had declined to 431,800, a decrease of more than 60 percent since 1950, and the number of apparel workers had fallen to 520,800, a decline of more than 56 percent since 1950.
Table I-14. Employment for All Manufacturing, Textiles, and Apparel,
|
||||||
| 1950 | 1980 | 2002 | %^1950-1980 | %^1980-2002 | $^1950-2002 | |
|---|---|---|---|---|---|---|
| Mgf. Workers | 15.0 | 20.0 | 16.7 | +33% | -16.5% | +11.3% |
| U.S. Textile | 1.26 | .85 | .43 | -33% | -49.1% | -64% |
| Apparel | 1.2 | 1.3 | .52 | +5% | -58.8% | -56.6% |
| Source: U.S. Department of Labor, Bureau of Labor Statistics | ||||||
Textile and apparel employment as a percentage of total U.S. manufacturing employment has also declined steadily over time (see Figure I-4). In 1950, textile and apparel workers accounted for 8.24 percent and 7.89 percent of all manufacturing jobs, respectively. By 2002, textile and apparel workers made up 2.58 percent and 3.11 percent of all manufacturing employees, respectively. In 2002, employment in the combined textile and apparel industry was 5.70 percent of all U.S. manufacturing employment, a decline from 16.13 percent in 1950. The decrease in textile and apparel employment was greater than the decrease in manufacturing employment as a whole over the same time period.
Figure I-4. Textile and Apparel Employment as a Percentage of All U.S. Manufacturing Employment
Source: U.S. Department of Labor, Bureau of Labor Statistics
For comparison, while the textile and apparel industries together employed nearly 1 million workers in 2001, the computer and electronic product manufacturing industry employed 1.6 million workers; the electrical equipment, appliance, and component manufacturing industry employed 556,000 workers; and the aerospace products and parts manufacturing industry employed 443,000 workers in the same year.
During the last few years, the U.S. textile and apparel industries have experienced a continued reduction in operating establishments and job losses. Table I-15 shows Bureau of Labor Statistics data on the declining number of U.S. textile and apparel establishments from 1997 through 2001.
Table I-15. U.S. Textile, Apparel, and Footwear Establishments, 1997-2001 |
|||||
| 1997 | 1998 | 1999 | 2000 | 2001 | |
|---|---|---|---|---|---|
| United States | 32,298 | 32,705 | 32,008 | 29,712 | 30,020 |
| North Carolina | 2,021 | 1,947 | 1,897 | 1,846 | 1,823 |
| South Carolina | 827 | 838 | 821 | 783 | 814 |
| Georgia | 1,334 | 1,259 | 1,224 | 1,152 | 1,137 |
| Alabama | 682 | 661 | 624 | 605 | 554 |
| Virginia | 444 | 428 | 397 | 383 | 388 |
| Tennessee | 654 | 603 | 577 | 556 | 518 |
| New York | 5,120 | 4,933 | 4,702 | 4,326 | 4,325 |
| Missouri | 401 | 397 | 397 | 403 | 366 |
| Pennsylvania | 1,408 | 1,383 | 1,335 | 1,293 | 1,372 |
| California | 7,483 | 8,457 | 8,291 | 6,951 | 7,124 |
| Other | 13,332 | 13,182 | 13,068 | 12,707 | 12,971 |
| Source: U.S. Department of Labor, Bureau of Labor Statistics | |||||
Job losses have closely tracked the operating establishment data, as shown in Table I-16.
Table I-16. U.S. Textile, Apparel, and Footwear Employment Levels, 1997-2001 |
|||||
| 1997 | 1998 | 1999 | 2000 | 2001 | |
|---|---|---|---|---|---|
| United States | 1,479,164 | 1,393,517 | 1,278,752 | 1,191,710 | 985,665 |
| North Carolina | 229,468 | 216,086 | 196,032 | 179,876 | 150,182 |
| South Carolina | 105,712 | 98,713 | 89,854 | 85,012 | 72,559 |
| Georgia | 142,338 | 137,878 | 131,102 | 125,648 | 102,553 |
| Alabama | 78,333 | 73,682 | 67,109 | 62,777 | 54,608 |
| Virginia | 53,367 | 49,229 | 42,827 | 36,037 | 29,363 |
| Tennessee | 59,073 | 52,727 | 44,251 | 39,228 | 29,887 |
| New York | 107,223 | 101,430 | 91,743 | 83,038 | 72,260 |
| Missouri | 21,472 | 19,581 | 16,029 | 13,780 | 10,535 |
| Pennsylvania | 66,595 | 63,681 | 58,368 | 54,454 | 46,930 |
| California | 179,183 | 174,519 | 169,203 | 166,531 | 140,623 |
| Other | 502,995 | 469,672 | 430,602 | 399,783 | 323,095 |
| Source: U.S. Department of Labor, Bureau of Labor Statistics | |||||
Table I-17 compares the change in the unemployment rate over this period for several states with significant textile and apparel industries.
Table I-16. U.S. Textile, Apparel, and Footwear Employment Levels, 1997-2001 |
||
| Jan 97 | Jun 03 | |
|---|---|---|
| North Carolina | 3.8% | 6.6% |
| South Carolina | 5.5% | 6.6% |
| Alabama | 5.1% | 5.7% |
| Pennsylvania | 5.2% | 5.7% |
| Georgia | 4.7% | 4.9% |
| California | 6.7% | 6.7% |
| New York | 6.4% | 6.1% |
| Tennessee | 5.6% | 5.3% |
| Virginia | 4.3% | 3.8% |
| National Average | 5.3% | 6.4% |
| Source: U.S. Department of Labor, Bureau of Labor Statistics | ||
The producer price index (PPI) measures the selling price received by domestic producers for their output. The consumer price index (CPI) measures the prices paid by consumers for a representative basket of goods and services. Figures I-5 and I-6 show the CPI and PPI since 1990, respectively. The figures show that the PPI has increased at a faster rate than the CPI. From 1990 to 2002, the PPI for textiles, apparel, and all manufacturing increased by approximately four percent, ten percent, and 17 percent, respectively. In contrast, over the same period, the CPI for men’s apparel increased by about two percent, whereas the CPI for women’s apparel decreased by five percent. The increase in the PPI during 1999 and 2001 for apparel and textile producers, coupled with the sharply declining CPI, indicates that these two sectors have experienced severe pricing pressures.
Figure I-5. Consumer Price Index
(1982-84=100)
Source: U.S. Department of Labor, Bureau of Labor Statistics
Figure I-6. Producer Price Index
(December 1984=100)
Source: U.S. Department of Labor, Bureau of Labor Statistics
B.3.c. U.S. Production Capacity and Capacity Utilization
Tracking the decline in employment and the number of textile and apparel plants is the number of machines in use in the textile and apparel industries. Textile machinery in place in the United States decreased significantly from 1992 to 2002 (see Table I-18). For example, the average number of shuttle looms declined from 30,865 in 1992 to 1,949 in 2002, a 93.7 percent decrease. Part of this decline is due to the replacement of shuttle looms by shuttleless looms; shuttleless looms operate at higher speeds with reduced noise levels and handle fabric in wider width. However, even the number of shuttleless looms in place declined over the period; the average number in 1992 was 65,442, and 39,472 in 2002, a decrease of 39.7 percent.
The number of loom hours operated is also considered here (see Table I-18). The total number of hours that shuttle looms operated in 1992 was 204.7 million; in 2002 it had decreased 93.4 percent to 13.5 million. The total number of hours shuttleless looms operated decreased 48.8 percent in that ten-year time period.
Table I-18. U.S. Loom Capacity 1992-2002 |
||||
| Avg. Looms in Place (Number) | Loom Hours Operated (Thousands) | |||
|---|---|---|---|---|
| Shuttle | Shuttleless | Shuttle | Shuttleless | |
| 1992 | Avg. 30,865 | 65,442 | 204,744 | 479,508 |
| 2002 | 1,949 | 39,472 | 13,468 | 245,491 |
| Source: U.S. Department of Commerce, Bureau of the Census, "MQ313T" | ||||
In addition to lower capacity, the utilization of remaining capacity has dropped, which indicates U.S. firms are responding to declining market forces. In its monthly report, “Industrial Production/Capacity Utilization,” the Federal Reserve provides data on the industrial production index, which measures the level of output in the industrial sector of the economy. The index provides information on the overall level of resource utilization in the economy. Between 1995 and 2002, the overall industrial production index increased from 87.8 to 111.7 (see Table I-19). However, the production index for textile and textile product mills decreased during this time period, from 96.7 to 82.4. Also, during this same period, U.S. capacity utilization decreased to 73.4 percent for manufacturing and to 73.6 percent for textile and textile product mills. The rise in output paired with the decline in capacity utilization likely reflects the more efficient use of manufacturing capacity.
Table I-19. U.S. Production and Capacity Utilization 1995-2002 |
||||
| Industrial Production Index, 1992 = 100 | Capacity Utilization | |||
|---|---|---|---|---|
| All Manufacturing | Textile & Textile Product Mills | All Manufacturing | Textile & Textile Product Mills | |
| 1995 | 87.8 | 96.7 | 82.9% | 88.5% |
| 2002 | 111.7 | 82.4 | 73.4% | 73.6% |
| Source: Federal Reserve, "Industrial Production/ Capacity Utilization" | ||||
Table I-18 highlights the drop in the number of looms in place in the United States. Table I-20 highlights the relative position of the United States compared to other major manufacturers.
Table I-20. Textile Machinery in Place 2001 (Thousands) |
|||
| Country/Region | Ring Spindles | Shuttle-less Looms | Shuttle Looms |
|---|---|---|---|
| United States | 2,379.0 | 42.8 | 2.1 |
| Canada | 300.0 | 3.1 | 0.0 |
| Mexico |
3,500.0 | 14.5 | 35.0 |
| Other North America | 1,089.0 | 5.5 | 13.0 |
| Total North America | 7,268.0 | 65.9 | 50.1 |
| Total South America | 8,993.0 | 53.6 | 126.8 |
| Western Europe | 5,598.7 | 50.1 | 9.1 |
| Eastern Europe | 8,383.7 | 169.5 | 24.5 |
| Turkey | 5,737.1 | 16.0 | 30.0 |
| Total Europe | 19,719.5 | 235.6 | 63.6 |
| Bangladesh | 2,469.0 | 3.2 | 4.7 |
| China | 35,483.9 | 82.9 | 578.4 |
| India | 38,091.3 | 11.8 | 129.4 |
| Indonesia | 8,500.0 | 27.0 | 200.0 |
| Iran | 2,075.0 | 14.5 | 12.0 |
| Japan | 3,432.0 | 18.9 | 29.6 |
| South Korea | 1,757.1 | 1.8 | 0.0 |
| Pakistan | 8,756.0 | 17.5 | 10.1 |
| Taiwan | 2,550.2 | 20.8 | 1.2 |
| Thailand | 3,586.8 | 52.0 | 18.2 |
| Uzbekistan | 1,440.0 | 25.8 | 0.0 |
| Other Asia/Oceania | 4,721.5 | 29.7 | 46.5 |
| Total Asia/Oceania | 112,862.8 | 305.8 | 1,090.2 |
| Egypt | 2,600.0 | 3.9 | 5.0 |
| Other Africa | 4,262.8 | 13.4 | 71.8 |
| Africa | 6,862.8 | 17.3 | 76.8 |
| World | 155,706.1 | 678.3 | 1,407.6 |
| Source: International Textile Manufacturers Federation Short Staple Sector Only | |||
According to this data, the U.S. share of ring spindles is 1.5 percent, shuttleless looms 6.3 percent, and shuttle looms 0.1 percent. Note the large share of machinery in place in both China and India in contrast to the rest of the world; these countries account for about one-half of all ring spindles and shuttle looms.
Productivity is an additional metric of industry health. The following indexed figures (see Figures I-7 and I-8) present productivity data on a five-year basis from 1950 to 1990 and on a yearly basis from 1990 to 2000. These figures also present total manufacturing output as well as output for the textile and apparel industries individually.
Labor productivity (defined as output per hour, all persons) has been steadily increasing since 1950, with apparel showing the greatest gains in recent years. Increased labor productivity is consistent with capital investments and with improved efficiencies in production. Since 1990, textile and apparel capital productivity has been steady and has even declined in the last few years. While capital productivity for manufacturing and apparel has declined since the 1950s, textile capital productivity has increased since the 1950s. This indicates that the industries are working to respond to competitive pressures, with some success.
Figure I-7 Labor Productivity Index (1950-2000)
Source: U.S. Department of Labor, Bureau of Labor Statistics
Figure I-8 Capital Productivity Index (1950-2000)
Source: U.S. Department of Labor, Bureau of Labor Statistics
Figure I-9. Output Index (1950-2000)
Source: U.S. Department of Labor, Bureau of Labor Statistics
Another way to view the productivity changes is to look at output and employment. Figure I-9 shows how the output index for the textile, apparel, and manufacturing sectors has been increasing since the 1950s. Though textiles and apparel have tapered off since the mid-1990s, manufacturing has continued to rise.
Figure I-10 shows that the hours worked by all employees have stayed fairly stable for manufacturing. Hours worked for both textiles and apparel have declined greatly since 1950 and continued a slow decline through 2000. This decline, together with output changes shown in Figure I-9, reflects high productivity increases.
Figure I-10. Hours Worked by All Employees Index (1950-2000)
Source: U.S. Department of Labor, Bureau of Labor Statistics
For the purpose of this study, the competitiveness of a domestic industry is measured by its ability to produce and sell goods and services in the international economy, in relation to domestic and foreign competitors. Unlike industry health, where one can make absolute statements such as “an industry with current negative profits and negative growth prospects is unhealthy,” the notion of competitiveness is always relative.
As defined here, health and competitiveness are very different concepts: an industry can be healthy and at the same time non-competitive, as could be the case for a heavily subsidized or protected industry. Similarly, an industry can be competitive and unhealthy. For example, if an industry from a given country outsells foreign competitors and gains world market share, but does so without obtaining adequate sustainable profits, then the industry would be competitive but not healthy. Firms in an industry may pursue such a revenue-maximizing goal rather than a profit-maximizing goal for strategic reasons.
This section assesses the competitiveness of the U.S. textile and apparel industries, relative to their competitors abroad. Also discussed is the U.S. share of global textile and apparel exports, which – albeit still relatively small – has increased since 1990. It then looks at various factors, ranging from labor costs to access to technology, which determine the competitiveness of the U.S. textile and apparel industries relative to their international competitors. The section concludes that in several key areas the U.S. textile and apparel industries are quite competitive, although it notes that on two factors – productivity-adjusted labor costs and environmental regulation – the United States lags behind many competitors. Because labor costs constitute a significant share of overall production costs for these industries, the impact of this input is disproportionately larger than other measures of competitiveness.
Although aggregate exports of U.S. textiles and apparel have decreased in the past few years (see Chapter I.A.6 above), the World Trade Organization reports that the United States increased its share of total global textile and apparel exports between 1990 and 2001 (see Figures I-11 through I-14). U.S. textile exports captured 7.1 percent of the global export market in 2001, up from 4.8 percent of world exports in 1990. This increase is due in large part to the movement of supply following textile manufacturing offshore. These exports include semi-finished product exported for further processing, the finished product of which may be imported back to the United States. U.S. apparel exports also grew as a percentage of world apparel exports over the period, from 2.4 percent to 3.6 percent, a 50 percent increase, for similar reasons.
Between 1990 and 2001, China’s share of world exports of both textiles and apparel increased, according to the World Trade Organization. Its share of textile exports grew from 6.9 percent in 1990 to 8.3 percent in 2001, while its share of world clothing exports nearly doubled, from 8.9 percent to 18.8 percent over the period. Hong Kong’s share of world textile exports grew slightly between 1990 and 2001, from 7.9 percent to 8.3 percent. Its share of world apparel exports fell over the period, from 14.3 percent to just over 12 percent. South Korea’s exports demonstrated a similar pattern. At the same time, the European Union lost export market share in both textiles and apparel.
Figure I-11. World Textile Exports, 1990
Source: World Trade Organization
Figure I-12. World Textile Exports, 2001
Source: World Trade Organization
Figure I-13. World Clothing Exports, 1990
Source: World Trade Organization
Figure I-14. World Clothing Exports, 2001
Source: World Trade Organization
C.2 Competitiveness Scorecard
As defined above, competitiveness is the ability of U.S. firms to produce and sell goods in relation to their international competitors. In this section, a comparison is made of competitiveness factors applicable to all manufacturing industries for various countries (see Table I-21). This comparison provides a business context for assessing the competitive atmosphere of the textile and apparel industries.
Table I-21. Ranking by Competitive Factors |
|||||||
| Country | Rank | ||||||
|---|---|---|---|---|---|---|---|
| Productivity-Adjusted Labor Costs |
Human Capital | Available Infrastructure | Technology Access | Financial Markets | Business Regulation | Environmental Regulation | |
| Canada | N/A | 2 | 2 | 3 | 3 | 7 | 12 |
| China | 2 | 12 | 9 | 10 | 10 | 6 | 5 |
| El Salvador | 4 | 11 | 11 | 9 | 9 | N/A | 2 |
| Hong Kong | 8 | 7 | 3 | 7 | 2 | 1 | 6 |
| India | 1 | 8 | 12 | 8 | 7 | 9 | 3 |
| Italy | 10 | 6 | 7 | 6 | 6 | 11 | 7 |
| Japan | N/A | 4 | 4 | 2 | 8 | 2 | 10 |
| South Korea | 6 | 3 | 6 | 5 | 5 | 5 | 8 |
| Mexico | 3 | 9 | 10 | 11 | 11 | 10 | 4 |
| Taiwan | 7 | 5 | 5 | 4 | 4 | 3 | 9 |
| Turkey | 5 | 10 | 8 | 11 | 12 | 8 | 1 |
| USA | 9 | 1 | 1 | 1 | 1 | 4 | 11 |
| Source: Jones (2003), Cornelius (2003) and Strategic Resources, Inc. (SRI) | |||||||
It should be noted that the United States ranks at the top in nearly every category, except for productivity-adjusted labor costs and environmental regulations. China, India, Mexico, and El Salvador rank near the bottom in many categories, except for productivity-adjusted labor costs, where they have an advantage, and lower costs due to less stringent environmental regulations.
Some textile and apparel firms have responded to what they consider to be the realities of the global market. During site visits conducted by BIS researchers, one firm reported that it had “reinvented” itself when the “realities of the global shift in textile production seemed evident.” The firm’s CEO told the BIS research team that in the mid 1980s, the “road to global overcapacity in the textile industry had already begun.” Survival “depended on our firm developing a strategy of exiting the commodity business, buying a brand name [one of its branded customers], and producing an end product.”
Other evidence suggests that some U.S. firms in the textile and apparel industries are pursuing new market strategies. These strategies fall into two major categories: (1) a shift in market focus and (2) increased product differentiation.
Traditionally, textile firms sell to apparel firms, which in turn sell to retailers. This is the textile-apparel-retail channel. Some firms are shifting away from this traditional channel in an attempt to directly reach the end-customer. For example, some textile firms are selling home furnishings such as sheets and towels directly to the retailer, and other textile firms are selling industrial products such as car seat covers, rugs, and carpets to firms in other sectors. The industry has shifted away from the predominant textile-apparel-retail model to sell to these three different channels.
During a site visit by the BIS research team, one firm said it is marketing some of its niche products directly to consumers through internet marketing. This company said it has also undertaken “co-branding with apparel producers” to make consumers aware that its proprietary products are available only on certain branded merchandise, a process it refers to as “pull-through” marketing.
The BIS industry survey provided additional support for the current shift in market focus. For example, firms indicated that they have begun to exploit the potential of e-commerce through their corporate websites. Firms emphasized that e-commerce would help them to deal directly with their ultimate customers rather than through the traditional textile-apparel-retail channel.
The survey also indicated that textile and apparel firms are turning more and more to niche markets to remain competitive. Textile and apparel firms mentioned table cloths, wall tents, and storm water filtration fabrics as just a few of the new markets they were pursuing. These firms noted that the main factor driving this shift to niche products was a desire to identify specialty markets where foreign competition had yet to make a significant domestic impact. Thus, niche markets could enhance firms’ survivability as they are currently less vulnerable to foreign competition than traditional textile and apparel markets.
One of the main reasons for the overall decline in shipments and employment in the U.S. textile and apparel industries is the lack of product differentiation, which prevents U.S. firms from raising their prices and improving their profitability. Pricing flexibility is limited in these industries because many textile products are by nature commodity type items, which are subject to intense price competition.
Some U.S. firms seek to differentiate their products by making them available in smaller volumes and with shorter lead times (“quick response”), according to survey responses. In practice, U.S. firms are setting up overseas operations for large volume production and U.S.-based operations for quick response. In some cases, retailers are pushing their U.S. suppliers to produce in smaller volume with shorter lead times in order to improve their own inventory and sales efficiencies.
The BIS industry survey supports the growing importance of the “quick response” production approach. Textile and apparel firms repeatedly mentioned the goal of manufacturing their products with shorter lead times. Textile and apparel firms also noted that they have invested in high-speed production machinery as well as automating other aspects of the production process in order to accomplish this goal. Thus, in today’s competitive marketplace, firms understand how urgent it is to deliver their products on time or ahead of schedule. As noted above, one of the essential ways in which a firm can distinguish itself from the competition is through its ability to accelerate delivery.