Apparel – 1991 U.S. Industrial Outlook
For the first time since 1985, shipments by the apparel and finished textile products industry (SIC 23) de clined in current dollars in 1990. Although shipments were down by 1.0 percent from the preceding year, they were at the second highest level on record. In constant (1987) dollars, industry shipments declined 4.4 percent in 1990. Thus, although the five-year upswing in current-dollar shipments ended, they remained at a relatively high level.
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, factors affecting trade data, forecasting methodology, the use of constant dollars, the difference between industry and product data, source and references, and the Standard Industrial Classification system (SIC).
Consumer spending on clothing continued to rise in 1990, although in real terms the increase was only about 1 percent, considerably less than the 4.8 percent increase recorded in 1989. In addition to more sluggish demand, the downturn in shipments also reflected the uncertainty and volatility in the U.S. retail sector, which influenced the apparel companies’ customers, that is, retailers, to purchase more conservatively, while at the same time making apparel suppliers somewhat reluctant to ship to financially troubled outlets. Another negative factor was a higher level of apparel inventories than the preceding year. Although inventories were not as excessive as during the industry’s previous downturn in 1984-85, they had a dampening effect on new orders flowing to apparel manufacturers.
Much of the weakness in apparel in 1990 was in menswear. After an upsurge in the preceding year, shipments for men’s trousers (SIC 2325) turned down, as the resurgence in sales of jeans ebbed and sales of the popular casually styled cotton slacks moderated. Shipments of men’s underwear and nightwear (SIC 2322) also slipped after gaining in 1989.
Shipments by the women’s outerwear sector (SIC 2331, 2335, and 2337) were relatively flat in current-dollar terms for the third consecutive year. In a reversal of 1989, a gain in dress shipments was offset by a decline in shirts and blouses.
Employment in the U.S. apparel industry declined slightly during the 1987-1989 period, about 1 percent per year, but in 1990 the decline was a more substantial 3.4 percent. The 1990 performance is more in line with the earlier periods of 1980-85, when employment fell at an clines in apparel reflect the deep inroads into U.S. markets made by imports, and the efforts by domestic manufacturers to improve efficiency by streamlining and consolidating operations.
Apparel manufacturing remains a highly labor intensive industry, with 84 percent of the work force in production jobs, compared with 68 percent for all manufacturing. Hourly wages average only about two-thirds the national average for non-agricultural employment. Compared with other manufacturing industries, the apparel industry employs more women and minorities. Women made up 77 percent of the apparel workforce in 1989, compared with 33 percent for total manufacturing. Minority workers had about double the representation in apparel as in manufacturing as a whole.
Spurred by the challenges of stiff competition and the diverse and changing demands of the American consumer, the U.S. apparel industry has undergone a marked transformation during the past decade. One response to the new market environment has been a heightened emphasis on technological improvements. Many labor-intensive operations are being automated. Innovations include multiple work stations, in which a machine performs more than one process or an operator controls two or more machines; and computer-controlled pattern making, spreading, marking, and cutting machines, which in addition to saving labor can also reduce material usage.
The industry recognizes, however, that apparel manufacturing remains labor intensive and that the competitive benefits of improved production technology are not a panacea. Consequently, the industry has become committed to the concept of Quick Response (QR) to capitalize on the advantages of being closer to its customers both physically and from the standpoint of understanding their preferences and tastes. QR involves expediting feedback of marketing information from consumers to manufacturers, thereby shortening production and reorder times and heightening responsiveness to fashion changes. At the heart of this strategy is electronic data interchange, notably bar coding and shipping container marking, which facilities rapid communication with fabric and trim suppliers and with retailers.
According to a recent private study, the number of textile and apparel companies implementing QR increased by a significant 20 percent during the previous two years. In an industry where fashion changes can occur overnight and inventory mismanagement can be disastrous, QR is spreading even though the considerable investment involved may not be recovered for some time. This means that the larger and stronger apparel companies are more apt to take advantage of this strategy. However, the report noted that smaller firms are increasingly becoming involved also, and many have ambitious programs planned for the next five years.
The trend toward internationalization of the apparel market will likely continue at a rapid pace. Several factors will sustain this development, including EC92, the emergence of market-oriented economics in Eastern Europe, and the likelihood of further hemispheric economic integration through the prospective U.S.-Mexico free trade agreement and other proposals for an open North American trading area.
With the U.S. market softening in 1990, imports of apparel were also relatively slow. Various upward pressures on prices of imports pushed the value up by more than 10 percent, but in terms of quantity, apparel imports rose barely 2 percent. Exports were buoyant in 1990, rising in value by 21 percent, twice as fast as imports. But despite this favorable growth rate differential, the apparel trade deficit widened substantially, from $20.5 billion in 1989 to $22.5 billion in 1990.
Two political issues with important implications for the U.S. apparel industry were dominant in 1990. The first was passage of the Textile and Apparel Trade Act of 1990, often referred to as “The Textile Bill,” its subsequent veto by the President, and the failure of the House of Representative to override the veto. The second issue was the Uruguay Round negotiations under the General Agreement on Tariffs and Trade (GATT) to modify the existing international trading system in textile products. The objective, as outlined in the Punta Del Este agreement, is to consider options that would permit eventual integration of this trade to normal GATT rules.
Import competition in apparel comes largely from the developing countries of Asia, although there has been significant growth in recent years from Mexico and the Caribbean countries. Asian countries, particularly China, have a formidable competitive advantage in apparel, thanks mainly to their abundant supply of relatively low-cost labor. In 1990, three Asian countries – China, Hong Kong, and the Philippines – accounted for approximately half of the growth in the value of imports, while a significant gain was also recorded for Mexico.
A substantial portion of the growth in U.S. exports of apparel in recent years has reflected greater shipments of apparel parts to Mexico, Central America, and the Caribbean under the tariff provision 9802 (formerly 807). The provision allows these products to be finished abroad and reimported into the U.S. market with duty charged only on the foreign value added. However, substantial gains were also recorded in exports to other markets. Sales to Canada doubled in value to nearly $350 million, and exports to Japan (the second largest market when countries involved primarily in 9802 trade are excluded) increased by more than one-third.
The future holds promising opportunities for the U.S. apparel industry. However, domestic and international competition will be no less intense than in the past. To succeed, companies will need to be even more closely attuned to changes in the marketplace and be capable of adapting to them. U.S. firms now have a genuine opportunity to take advantage of foreign market growth and the progress that has been made in eliminating trade barriers abroad.
Projected future demographic trends indicate a favorable demand picture for the apparel industry through the end of this century and into the first decade of the next. By far the fastest growing group in the population will be the over-45 age category as the baby boomers enter middle age. This group is at its peak spending capability and will represent a strong market for many types of apparel, including career clothing, active wear, and casual and informal attire. Manufacturers best attuned to the needs and tastes of this population segment will capture the greatest rewards. – Kent Barker, Office of Textiles and Apparel, (202) 377-4058, November 1990.
Current Industrial Reports, SIC 23, U.S. Department of Commerce,
Bureau of the Census, Industry Division, Washington, D.C. 20233.
Telephone: (301) 763-7807. Apparel Manufacturing Strategies, American Apparel Manufacturers
Association, 2500 Wilson Boulevard, 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. Cline, William R., The Future of World Trade in Textiles and Apparel,
Institute for International Economics, 1987 11 Dupont Circle, NW,
Washington, DC 20036. Telephone: (202) 328-9000. Daily News Record, Fairchild Publications, 712 E. 12th Street, New York,
NY 10003. Telephone: (212) 741-4200. Focus: Economic Profile of the Apparel Industry, American Apparel
Manufacturers Association, 2500 Wilson Boulevard, Arlington, VA
22201. Telephone: (703) 524-1864. Monthly Labor Review, April 1988, U.S. Department of Labor, Bureau of
Labor Statistics, Washington, D.C. 20211. Telephone: (202) 523-1327. The Textile/Apparel Industries, Fairchild Fact File, Fairchild Books, 7
East 12th Street, New Yor, 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,
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Telephone: (202) 228-6204. Women’s Wear Daily, Fairchild Publications, 712 E. 12th Street, New
York, NY 10003. Telephone: (212) 741-4361.
PHOTO : Projected demographic trends for the future indicate favorable demand for the apparel industry through the end of this century and into the first decade of the next.
COPYRIGHT 1991 U.S. Department of Commerce
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