Tough Year for Tougher Trade

After a Sobering Start, 2005 Wasn't as Bad as It Seemed

Don Hogsett, Staff Staff, January 30, 2006

Washington —Hammered by a punishing trifecta of low-cost imports, most notably form China; sharply rising raw material costs; and an indifferent retail community that insists on ever lower prices for the products that it buys, the American textiles industry continued to contract and lose ground during 2005, the National Council of Textile Organizations (NCTO) reported in its annual check-up of the industry's health.

Swamped by the continuing flood of imports, 31 textiles and apparel plants were closed during 2005, far worse than the 24 closed the year before — and more than 30,000 workers lost their jobs.

That said, 2005 wasn't nearly as bad as it might have been, or felt to many, the textiles trade group reported. Indeed, there were a few more bright spots than there have been in recent years.

Last year got off to a scary start, with the industry rattled by the prospects of the quota phase-out and “the danger of an enormous flood of subsidized imports from China,” said the year-end NCTO review. But while quotas did disappear, and imports did race ahead, new safeguards imposed by the government “moderated the damage and even led to small production increases in the later half of the year.”

Helped by the safeguards, textiles and apparel corporate sales were off last year, but just barely, slipping by 0.4 percent, and some of that represented price deflation at the hands of tight-fisted customers rather than lower unit volume.

Remarkably, overall profits for the textiles and apparel industry rebounded strongly, improving by 65.1 percent, to $2.1 billion from $1.3 billion the preceding year, in part reflecting the restorative effects of bankruptcy and the debt that got wiped off the books at some producers, like WestPoint Stevens and Dan River.

Given the big bump-up in profits, the key performance metric of return on sales — profits measured as a percentage of sales — improved to 6.7 percent from 3.4 percent the year before. That's particularly notable, since it put the textiles and apparel industry's performance virtually on a par with all U.S. manufacturing, where return on sales averaged 6.8 percent during 2005.

And with all the talk about the industry being hobbled by imports, as it surely has been, lost in the shuffle is the fact that industry exports have actually been increasing. Overall textiles and apparel imports grew last year by 2.7 percent, to $16.5 billion from $16.1 billion in 2004. And the big gain last year was the textiles segment, outperforming apparel and putting up a 5.6 percent increase in exports, to $12.1 billion from $11.4 billion.

Which underlines a point worth noting — as tough as it is in textiles, it's just as tough, if not worse, in apparel. If you think selling sheets is rough, try peddling dresses. Last year, textiles imports were up 7.4 percent, to $28.5 billion. But apparel imports were up slightly higher, by 7.5 percent, to $21.8 billion.

And when it comes to trade with China, apparel is far more badly beaten up. Textiles imports from China were up a daunting 25.1 percent, to $10.5 billion. But apparel imports from China almost doubled, rising a scary 93.1 percent, to $5.6 billion.

And all those imports are taking their toll on jobs, far more in apparel than in textiles. Last year, the textiles segment lost 11,300 jobs, down 2.7 percent from 2004. But the apparel business was devastated, hit almost twice as hard, losing 19,200 jobs, down 7.2 percent from the preceding year.

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