Some observers of the fall in US consumer spending have noted that despite the overall contraction, some merchants, such as Wal-Mart, are reporting solid sales gains. They infer that buyers are still spending, but have downtraded radically so as to reduce their total expenditures.
While one needs to take care in generalizing from the US experience, one might assume recessionary spending patterns elsewhere: a reduction in discretionary purchases, greater focus on the basics, a cutback on durables as they are traded in less frequently.
What seems surprising is that cotton, which is used primarily for staples rather than luxury items, has seen a sharp fall in demand. From Bloomberg:
Cotton users are halting orders from the U.S., the world’s biggest exporter, at the fastest pace in at least a decade as the economic slowdown erodes demand from China and sends prices to a six-year low.
Delays, cancellations and order reductions of U.S. upland cotton by foreign buyers rose almost sevenfold from a year earlier to 329,600 running bales (74,752 metric tons) in the first 13 weeks of the marketing year that started in Augus….The level is the highest since at least 1998. A bale weighs 500 pounds.
Cotton prices fell 54 percent from a 12-year high in March, and Barclays Capital says demand is so weak no rally is likely to last…..
“We are seeing quite a few delays,” said Andy Weil, president of Weil Brothers Cotton Inc. in Montgomery, Alabama, and past president of the American Cotton Shippers Association. “Demand is in a terrible state of affairs. When Chinese exports depend on American and Europeans economies, which are now in a recession, they have no demand for raw materials.”
China, the world’s biggest cotton importer, canceled or delayed 34,100 bales of U.S. orders in the week ended Oct. 23, or 4,100 bales more than its new orders, according to the USDA. Total reductions reached 41,300 bales that week, including buyers in Bangladesh and Indonesia. A week later, cancellations and delays were 11,500 bales from buyers in China, Turkey and Indonesia, government reports show….
Global cotton use will drop 3.3 percent to 119.3 million bales in the current marketing year, the USDA estimates. China will consume 51 million bales, down from an initial estimate of 55 million and the first annual decline in a decade, as consumer spending falls, the USDA said…
Jiangsu Yulun Textile Group Co., a yarn spinner in Jiangsu province, buys cotton to last less than a month, compared with three months of inventories in the past.
“We are having difficulty with financing,” Zhang Jianhong, manager of materials at Jiangsu, said by telephone from Qingjiang. “The risk of importing cotton is very high. The downstream businesses, the clothing manufacturers, owe us money. All we have are bunch of IOUs. It’s a very difficult time.”
Cotton consumption will be lower than previously expected in Pakistan and Turkey, the largest importers after China, according USDA forecasts.
“For my company, the demand is fairly non-existent,” said Angie Goodman, president of Lubbock, Texas-based ACG Cotton Marketing LLC, which ships cotton mainly to Turkey. “They are buying in a hand-to-mouth method.”