Apparel and fabricated textile products - Industry Overview

Before reading this chapter, please see "How to Get the Most Out of This Book" on page 1. It will clarify questions you may have concerning data collection procedures, forecasting methodology, sources and references, and the Standard Industrial Classification (SIC) system. For other topics related to this chapter, see chapters 11 (Chemicals and Allied Products), 19 (Industrial Machinery), and 39 (Retailing).

The apparel and fabricated textile product industry (SIC 23) followed a depressed pattern similar to that of the overall U.S. economy in 1991, reflecting the effects of the recession, the Persian Gulf crisis, and continued turmoil in the retail industry. Sluggish consumer demand contributed to flat industry shipments in 1991, after declines in the previous two years, and was also the major reason for a drop in 1991 apparel and fabricated textile product imports. Industrial production and employment in the apparel and fabricated textile product industry continued to decline, although earnings rose modestly.

The rate of increase in prices for apparel and fabricated textile products slowed. Measured in constant dollars, the value of apparel and fabricated textile product industry shipments declined by more than 1 percent in 1991.

Consumer spending on clothing continued to increase in 1991 by a modest amount, but slumped in real terms. Retail sales of apparel and accessory stores were flat. Inventories, although still high, declined from the record levels posted the previous year. The ratios of inventory to sales were unchanged in 1991, although the trend during the year was toward lower levels.

Industrial production in the apparel and fabricated textile product industry declined in both 1990 and 1991, reaching its lowest level since 1985. Capacity utilization, a measure of the extent to which each establishment's available capacity is being used, also continued to fall, to a low of 72 percent in early 1991. In subsequent months, however, productive capacity utilization began to increase.

Men's and boys' outerwear and underwear industry shipments were flat in 1991, following declines the preceding two years. Menswear, which accounts for about one-quarter of total apparel and fabricated textile product shipments, showed early weakness, in response to declines in economic activity, but began showing signs of recovery in the latter months. Employment continued to decline, but average hourly earnings edged upward.

Women's wear shipments, accounting for another one-quarter of total apparel and fabricated textile product shipments, have been flat the last two years, despite only a slight falloff in employment as industry productivity increased. Imports of women's apparel fell in value terms in 1991.

Domestic manufacturers of children's wear were generally able to increase shipments during the past few years. This sector is growing because of the increasing number of women who deferred childbearing until they were relatively affluent, allowing them to allot a greater portion of their budget for children's clothes.

The fabricated textile products grouped in SIC 239 encompass a wide variety of products, including curtains and draperies (SIC 2391) and textile homefurnishings (SIC 2392); textile bags (SIC 2393), canvas products (SIC 2394), pleating, stitching and embroideries (SICs 2395 and 2397), and automotive trimmings and findings, including apparel (SIC 2396). Together these industries make up an important component of SIC 23, accounting for almost 25 percent of total SIC 23 shipments in recent years, up from 17 percent in 1972.

Shipments of fabricated textile products declined by more than 1 percent in current dollars and almost 3 percent in constant dollars during 1991. Overall activity in these industries was adversely affected by the lackluster performance in the automobile sector (automotive trimmings and seat belts are two major products made by this industry group).

Current-dollar textile homefurnishing shipments declined slightly during 1991. Although quantity shipments fell only slightly, frequent discounting in the towel and sheet segments hurt overall industry profitability.

Technological Advances

Technological advances in the apparel and fabricated textile product industry have been concentrated in two areas: developing faster ways of determining and responding to consumer preferences in the marketplace, and using computers to aid design, cutting, and assembly of garments and other products.

Tremendous strides have been made by the U.S. apparel and fabricated textile product industry in the last few years in its ability to respond to customer preference in fashion, color, and fabric. This concept, called Quick Response, allows manufacturers to quickly bring to market additional products that are in demand, while avoiding production of items with low consumer preference. Different approaches are being used to implement Quick Response, most centering on electronic feedback, using bar codes or other methods of gauging consumer sentiment. In addition, some manufacturers and retailers are experimenting with methods to integrate market research by assessing consumer preference before goods are manufactured. These market research techniques range from manufacturing a limited run for sale in outlet stores to developing satellite research operations that show various style selections to selected subjects in different parts of the country for approval and comment. Computers and computer-controlled machines are increasingly being used in the apparel and fabricated textile products industry to increase productivity and efficiency. Computers are being used in apparel design and sales presentations. They are also being used to cut costs by calculating the least costly pattern layouts in terms of materials consumed, and by determining automatic stitching patterns to minimize thread breakage. In addition, computers control automatic sewing and embroidery machines.

Employment and Earnings

The apparel and fabricated textile product industry is very labor intensive. Apparel and fabricated textile product shipments account for only about 2 percent of shipments of all manufacturing industries, but the industry employs almost 6 percent of all employees in manufacturing industries and 7 percent of all production workers.

Employment in the industry has been declining since 1985, and dropped to less than 960,000 employees in 1991, in part because of productivity gains as output has been maintained with fewer workers. Production workers account for about 85 percent of the total employees. Average hourly earnings continued to increase, rising by 2.7 percent in 1991, but apparel and fabricated textile product wages remain well below the average for all manufacturing.

INTERNATIONAL COMPETITIVENESS

Although historically not an export-oriented industry, apparel and fabricated textile product manufacturers have increasingly turned their attention to overseas markets in recent years as imports gained a larger foothold in the domestic market. Exports accounted for 6 percent of product shipments in 1991, up from 2 percent as recently as 1987. Although the decline in the value of the U.S. dollar since 1985 has contributed to the export growth, other factors, such as the growing middle classes in some markets and the increased demand for higher-quality apparel and fabricated textile products, have contributed to the surge.

Men's outerwear and home furnishings are the largest export categories. Some apparel exports are actually pieces of clothing (cut parts) shipped to other countries, such as Mexico and Caribbean Basin Initiative (CBI) countries, for assembly and eventual return to the U.S. market under the HTSUS 9802 tariff provision (previously 807). However, a significant portion of U.S. apparel exports are actually consumed abroad. Canada is the largest export market for apparel and fabricated textile products, but the biggest increases have been to Southeast Asia, Latin America, and Japan. Great export potential exists as U.S. firms expand their relatively small share of the apparel and fabricated textile product markets of some major consuming nations such as Japan, the EC countries, South Korea, Hong Kong, and Taiwan. U.S. Government export promotion efforts in the apparel and homefurnishings areas, including trade shows and export seminars, have fueled a surge in exports.

Apparel and fabricated textile products are imported into the United States under the framework of the Multifiber Arrangement (MFA), an international agreement that sets out procedures by which signatory countries can regulate textile and apparel trade through quota controls to prevent disruption to domestic producers and ensure the orderly development of trade flows. In July 1991, the MFA, first negotiated in 1973, was extended for the fifth time, through December 1992. The potential for change in future apparel and fabricated textile product international trade depends on the successful completion of the current General Agreement in Tarffs and Trade (GATT) negotiations (Uruguay Round), which encompass a gradual phaseout of the MFA and the return of textile and apparel trade to regular GATT rules.

The largest apparel and fabricated textile product suppliers to the U.S. market in 1991 were China, Hong Kong, Taiwan, and South Korea, but of these countries only imports from Taiwan grew in 1991. These four countries accounted for about half of total apparel and fabricated textile product imports in 1991. Other increases in apparel and fabricated textile product imports were mainly from countries with extensive HTSUS 9802 operations.

Imports do not affect the fabricated textile industries uniformly. U.S. textile homefurnishings have generally been regarded as some of the finest of their class in the world, and face relatively less, although growing, import competition. On the other hand, the import of automobiles and the establishment of parts and assembly operations in Canada and Mexico have increased the export volume of automotive trimmings and other fabricated textile products used in motor vehicles.

The value of imports of fabricated textile products increased almost 5 percent in 1991, primarily due to growing imports of textile bags, carpet backings, and embroideries. Imports of automotive trimmings and automobile seat belts slowed in 1991, reflecting the slowdown in U.S. auto sales. A decline in homefurnishing imports also moderated the import increase.

Imports by SIC classification with the largest increases in 1991 were men's neckwear and underwear and women's nightwear, underwear, and brassieres.

Long-Term Prospects

Prospects are good that the U.S. apparel and fabricated textile product industry will experience a resumption of growth in the next few years. Moderate growth in the economy and in capital and R&D expenditures, combined with increased emphasis on consumer preferences and Quick Response, should stimulate the domestic market. Favorable movements in demographic, economic, and technological trends should help boost shipments. The need for new technological approaches to meet the requirements of the apparel and fabricated textile product consuming public will also support growth.

In the fabricated textile products segment, demographic and lifestyle changes brought about by the aging of the population should stimulate consumer interest in home redecorating and remodeling. This should boost sales of kitchen, living room, bedroom, and bathroom textiles. A likely decrease in new residential construction, caused by a reduction in the number of young homebuyers, should also serve to reorient homefurnishing companies towards the redecorating market.

Exports will continue to provide a significant share of the growth in shipments of apparel and fabricated textile products, even though U.S. manufacturers will still encounter stiff challenges from foreign competitors. U.S. companies should continue to take advantage of export opportunities in countries such as Japan, where trade barriers have been reduced. The unification of the European Community (EC 92) will offer important opportunities for greater U.S. participation in that market, and the economic liberalization of Eastern Europe may eventually provide additional sales as the rebuilding of those economies progresses. In the Middle East, unique export opportunities abound as recovery progresses following the crisis there. In addition, the North American Free Trade Agreement, if concluded, should provide significant opportunities for apparel and fabricated textile product sales in Mexico.

[TABULAR DATA OMITTED]

Additional References

Apparel Manufacturing Strategies, American Apparel Manufacturers Association, 2500 Wilson Blvd., Arlington, VA 22201. Telephone: (703) 524-1864. Bobbin, Bobbin International, Inc., 1110 Shop Road, P.O. Box 1986, Columbia, SC 29202. Telephone: (803) 771-7900. Current Industrial Reports, SIC 23, U.S. Department of Commerce, Bureau of the Census, Industry Division, Washington, DC 20233. Telephone: (301) 763-7807. Daily News Record, Fairchild Publications, 712 E. 12th St., New York, NY 10003. Telephone: (212) 741-4200. Focus: Economic Profile of the Apparel Industry, American Apparel Manufacturers Association, 2500 Wilson Blvd., Arlington, VA 22201. Telephone: (703) 524-1864. The Future of World Trade in Textiles and Apparel, William R. Cline, Institute for International Economics, 1987, 11 Dupont Circle NW, Washington, DC 20036. Telephone: (202) 328-9000. Monthly Labor Review, April 1988, U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC 20211. Telephone: (202) 523-1327. The Textile/Apparel Industries, Fairchild Fact File, Fairchild Books, 7 East 12th St., New York, NY 10003. Telephone: (212) 887-1866. The U.S. Textile and Apparel Industry: A Revolution in Progress Special Report, U.S. Congress, Office of Technology Assessment, OTA-TET-332, Washington, DC, U.S. Government Printing Office, April 1987. Telephone: (202) 228-6204. Women's Wear Daily, Fairchild Publications, 712 E. 12th St., New York, NY 10003. Telephone: (212) 741-4361.

COPYRIGHT 1992 U.S. Department of Commerce
COPYRIGHT 2004 Gale Group