By Jim Borneman, Editor In Chief
The “January 2024 Manufacturing ISM® Report On Business®”on TextileWorld.com in the Breaking News section suggests that business will remain challenged as 2024 takes shape.
Manufacturing in general has not been the robust consecutive growth story of the recent past, rather, the January reports shows it is the 15th consecutive month of contraction of U.S. manufacturing industries, “following one month of‘unchanged’ status and 28 months of growth prior to that.”
That two years of consecutive monthly growth was a great growth underpinning that textiles’two reporting sectors — “Apparel, Leather & Allied Products”and “Textile Mills” — generally did well.
The bright side is that both textile sectors were two of four sectors reporting growth in the January 2024 report, while the 13 other industries reported contraction.
There is a lot of blame to go around. Inflation, higher interest rates, election year politics and war are all things that can make businesses pause.
Inflation and interest rates are factors that can really highlight age. Inflation — for those who may never have experienced it — is a real pocketbook smack for consumers, who for years have grown accustomed to stable base prices and frequent sales.
All of a sudden, base prices rise significantly, are sticky and sales don’t happen as often. And prices don’t head back down, even with the talking heads saying “all is well, inflation is waning …”
Falling inflation rates don’t address the price increases already in place, and signal that consumers can expect higher prices at a lower rate — this is good news? It’s akin to saying,“I’ve gained twenty pounds in the last year, and it looks like I will continue to gain weight, but at a lower rate,” which is not what a cardiologist wants to hear.
With years of artificially low interest rates established by the Federal Reserve, free money — loans taken at very low interest rates — created an unusual investment environment.
The decision on making multi-million dollar investments changes drastically when the risk-free-rate-of-return approaches 5 percent. That just means that investors — and banks — can make 5 percent on their money with no risk — say by investing in Treasury Bonds — rather than lending to capital intensive industries like manufacturing.
Will rate cuts happen in 2024? Who knows. But seasoned manufacturers have seen this before. The concerns are two-fold. Will consumer demand be there when new capacity comes online? And is the environment stable enough to invest? Is it time to be cautious and play wait-and-see?
Innovation, creative destruction and reinventing stalling sectors are concepts that don’t wait-and-see well.
The U.S. textile industry has survived, and even thrived, during more challenging times. There is no shortage of energy and investment going into advanced sectors
of the industry, but there are some tough stories in textiles right now including plant closings and import pressures. However, if the industry continues to fight forward and face the challenges as the year takes shape — it may be difficult, but just maybe 2024 holds more promise than expected.
January/February 2024
