Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
February 2025
Macroeconomic Overview: Policy-related uncertainty may be a factor clouding the outlook, but recent data describing the U.S. economy show that the labor market, consumer spending, and GDP growth were healthy coming into the start of 2025.
The International Monetary Fund (IMF) updated its forecasts for GDP in January. It now projects the world economy to grow 3.3% in 2025 and 2026. Previous estimates (released in October) suggested 3.2% growth in 2025 and 3.3% in 2026. The average growth rate between 2000 and 2019 was 3.7%.
The relative stability of IMF forecasts for world-level GDP mask a divergence in the direction of updates at less aggregated levels. The U.S. continues to outperform expectations, and the forecast for U.S. growth was revised higher (+0.5 percentage points from 2.2% to 2.7% for 2025 and +0.1 from 2.0% to 2.1% for 2026). The Federal Reserve projects real GDP in the U.S. to grow 2.1% in 2025 and 2.0% in 2026. The U.S. Bureau of Economic Analysis (BEA, the official source of U.S. GDP data) recently released its first estimate for the entire 2024 calendar year. At 2.8%, it is near the BEA’s 2.9% figure for 2023.
IMF projections for China were also revised higher (+0.1 percentage points to 4.6% for 2025 and +0.4 to 4.5% for 2026). This contrasted with reductions to forecasts for Europe. IMF estimates for Euro Zone GDP were lowered -0.2 percentage points for 2025 (to 1.0%) and -0.1 points for 2026 (to 1.4%).
A strong labor market continues to support U.S. consumer spending, and therefore economic growth. Estimates for U.S. spending over the holidays came in above expectations (4.0% estimated by the National Retail Federation or NRF, the NRF’s holiday spending forecast suggested growth between 2.5-3.5%). The stronger-than-expected spending around the end of the year came despite a shorter holiday sales period (due to the Thanksgiving holiday being later than usual). While consumers are still facing higher prices, unemployment remains low, and wage growth has been outpacing inflation since the second half of 2023.
Employment: The U.S. economy is estimated to have added +143,000 jobs in January. Revisions to previous estimates for November (up +49,000 to +261,000) and December (up +51,000 to +307,000) were positive.
The unemployment rate decreased marginally, from 4.1% to 4.0%. Despite a gentle upward trend since 2023, the unemployment rate has ranged between 4.0% and 4.2% since May 2024, remaining at levels that are low by historical standards.
Wage growth was 4.2% in January. Since March of last year, wage growth has been between 4.0% and 4.2%. While lower than the growth posted between 2021 and 2023, recent levels are higher than any values posted in the time between the financial crisis and the onset of COVID. Recent values are also higher than inflation rates (overall CPI increased 2.9% in December). Wage growth has been stronger than inflation since early 2023, and wages have been more than one percentage higher than inflation for the past seven months.
Consumer Confidence & Spending: The Conference Board’s Index of Consumer Confidence decreased for a second consecutive month in January (-3.3 points in December to 109.5 and -5.4 points in January to 104.1). With these decreases, the index has fallen from the upper end of the range between 95 and 115 that have contained values since the third quarter of 2021.
Overall consumer spending increased 0.4% month-over-month in December. Year-over-year, overall spending was 3.1% higher. Total spending accelerated late in the year. Between September and December, the average monthly increase was 0.4%. Between January and August, the average rate of spending growth was half as strong.
Spending on garments was 0.3% higher month-over-month in December and was up 1.7% year-over-year. Apparel spending also accelerated later in the year. Between September and December, the average monthly increase was 0.8%. Between January and August, the average monthly rate of clothing spending growth was -0.2%.
Consumer Prices & Import Data: Average retail apparel prices, as measured by the CPI for clothing, increased 0.2% month-over-month and were up 1.4% year-over-year in December. Current price levels are the highest since the early 2000s.
Average import costs, represented by the average price per square-meter-equivalent (SME), increased slightly month-over-month (from $3.62/SME to $3.68/SME, seasonally-adjusted) and year-over-year (from $3.64/SME to $3.68/SME) in data for December. Import volumes accelerated near the end of the year, with the amount of cotton-dominant SMEs in the second half of 2024 up 10% relative to the average in the first half of the year (all data seasonally-adjusted).
