Will U.S. Consumers Pay More for Domestic Textiles?

Despite margin compression resulting from feedstock price increases over the first quarter, Great American Group, Inc. analysts note that the overall textiles industry continues to make progress after bottoming out in 2009.

Great American Group's latest Textiles and Apparel Monitor finds that, while domestic demand remains intact, overseas concerns have largely driven market trajectory. Cotton prices rose steadily from November 2012 through March 2013, but have flattened in the wake of weaker economic forecasts for China. The rising cost of Chinese textile production has also impacted the domestic apparel market.

"Industry news still points to rising labor costs and inflation in China as a concern, and some manufacturers have, in fact, relocated," says Kristi Faherty, managing director for Great American Group's Industrial Appraisal division. "However, the implications and extent of shifting operations have not become clear as of yet."

While the impact of overseas concerns cannot be understated, the domestic market is not shaped solely by external factors. Recent reports indicate that reinvestment in domestic mills has led to consistently improving mill efficiency over the past four years.

"Whether the current rebound is being driven by forces in the U.S. or by higher costs in China, it is certain that the industry is showing a necessary adaptive ability," says Faherty. "Many marketers believe that customers are willing to pay a premium for domestically-produced textiles. However, it remains to be seen whether overseas operations will be 'inshored' to the U.S. or simply relocated to another foreign country."
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