Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
April 2026
Macroeconomic Overview: The outbreak of the conflict in Iran generated a global energy shock. The region around the Persian Gulf supplies about 20% of the world’s oil and gas consumption, and nearly all of that flows through the contested Strait of Hormuz. In terms of crude oil, the volume transiting through the strait represents about 25% of the world’s seaborne oil trade and about 20% of global liquified natural gas shipments (International Energy Agency or IEA). There are limited alternative routes for these deliveries, so an effect has been a sharp contraction in energy supply and steep increases in energy prices.
The vast majority of the oil and gas shipments coming out the Persian Gulf flow to Asia (IEA estimates 80% of shipments through the Strait of Hormuz are destined for Asia). Asia is home to about 60% of the world’s population (United Nations) and much of its manufacturing capacity. This suggests higher costs of living for consumers on the continent, who may have to reallocate budgets to pay for energy.
Higher energy prices also suggest higher costs of production for manufactured goods. Oil represents about 20% of China’s total energy supply, and nearly 75% of China’s oil use comes from imports. Natural gas represents a smaller portion of Chinese energy use (8%) and about 40% of China’s natural gas is imported (2023 data from the IEA).
Crude oil represents 25% of the energy supply in Vietnam, with about 40% of that oil coming from imports. Natural gas represents about 6% of Vietnam’s energy supply, and most of that is produced domestically.
For Bangladesh, the IEA estimates that 50% of the power sector is fueled by natural gas, with about 20% being imported. Crude oil represents about 25% of Bangladesh’s energy, with 85% of that being imported.
All of the above highlights costs pressures across economies and throughout textile supply chains. While Asia may have higher exposure to the change in global energy supply, energy markets are global, and the effects are worldwide. In the U.S., which is a net exporter of both crude and natural gas, average gasoline prices have already increased by about one dollar per gallon (from less than $3.00/gallon in late February to levels near $4.00/gallon by the end of March). In terms of farm inputs for cotton production, both diesel and fertilizer costs have risen significantly.
Employment: The U.S. economy is estimated to have added +178,000 jobs in March. In recent months, the values for job growth have been erratic, with a relatively strong reading in January (+160,000), a relatively weak reading in February (-133,000), and the current strong reading in March (+178,000). Revisions to previous months were mixed, with the figure for January increasing (+34,000 to +160,000) and the figure for February decreasing (-41,000 to -133,000). The current twelve-month average for job gains is now +22,000. For the twelve-month period ending in March 2025, growth averaged +76,000.
The unemployment rate was nearly unchanged at 4.3% in March (was 4.4% in February). Levels below five percent are low by historical standards. Excluding the volatility around COVID, the current period below five percent is the longest since the 1960s.
Wage growth slowed in March (from +3.8% in February to +3.5%). The value for March is the lowest since the period of volatility around COVID, but it is higher than most of the values posted in the decade after the financial crisis and remains above the overall rate of inflation (overall CPI was +2.4% year-over-year in February, but that reading was the before the start of the conflict in Iran).
Consumer Confidence & Spending: The Conference Board’s Index of Consumer Confidence® was nearly unchanged month-over-month in March (+0.8 points to 91.8). Consumer spending on clothing continues to outpace overall spending. In January (latest available), spending on apparel was up +3.2% year-over-year while overall spending was up +2.4%.
Consumer Prices & Import Data: The CPI for garments increased +1.8% month-over-month in February, which is the highest monthly increase since 2018. Year-over-year, average retail prices for clothing were +2.9% higher. The current level for the CPI for apparel is the highest since the 2000s, but it is only slightly higher that the values posted in the 2010s. After the 2010/11 spike in fiber prices, retail apparel prices peaked at a level about 4% lower than the latest reading.
Following the Supreme Court ruling on February 20th that revoked many of the tariffs increases in 2025, tariff rates were adjusted to a level ten percentage points higher than they were in 2024. These increases were nearly universal across most sourcing locations, with goods covered by the USMCA (U.S., Mexico, Canada Agreement, the successor to NAFTA) and textile goods from CAFTA-DR countries exempted from the ten-point addition to base rates.