The supply-and-demand ratio for cotton, spurred by economic malaise and natural disasters, saw prices reach their highest point since the Civil War at about $2.12 a pound in March. That put polyester back in vogue, but prices for the synthetic fiber had been inflated for some time by high petroleum costs — crude oil is up to $99.80 a barrel from $83.76 a year ago — while capacity had been curtailed over the years due to waning demand.
Cotton prices topped out in the spring before dropping back to about 89.5 cents a pound this month. J. Berrye Worsham, president and chief executive officer of Cotton Inc., noted that the rule of thumb is that a 50 percent increase in the cost of a fiber will result in a 3 percent cost bump at retail.
Polyester prices rose modestly in the last year, with staple currently selling at about 92 cents a pound compared to 85.5 cents a year ago; filament is 81 cents a pound versus 74 cents last year.
The spike in fuel and low demand has sunk profits for shippers, too. “There will be too many ships in the world and pressure on shipping rates for a long time,” said Ronald Widdows, chairman of the World Shipping Council. “We’re in the process of driving rates down, producing tremendous losses for companies…the result is an industry that lost $20 billion in the last year.”
While Australian wool supplies are likely to rise by about 3 percent, falling production by competing supplier nations means that global supplies will remain tight, according to Australian Wool Innovation, the marketing and research organization for Australian wool growers. Wool sells for about $5 a pound today compared to $4.12 a year ago.
The luxury goods sector, while more protected on the consumer side, has also felt the pinch of high producer prices. Gold has been selling at record highs for some time and it is currently trading at $1,711.30 an ounce, about 20 percent higher than a year ago, when it was about $1,390 an ounce. There’s been talk about $2,000-an-ounce gold among experts. Many jewelers turned to silver in the last few years as an alternative, but that metal has also been on the rise, currently selling at $32.23 an ounce from about $28.50 a year ago.
All these rising prices caught up with retail prices this fall. The Consumer Price Index showed retail apparel prices rising 0.4 percent in October from September and 4.2 percent from a year earlier.
Retail apparel prices have not been this high on a year-over-year basis since November 1991, according to Scott Hoyt, director of consumer economics at Moody’s Analytics. “The good news is cotton prices are coming down, so the end is in sight,” he said. But the decline probably won’t be felt until next year and economists said the retail apparel price increases wouldn’t necessarily improve profitability because of tepid demand and aren’t enough to balance cost increases.
All this impacted the stock market and consumer confidence worldwide. In the U.S., stocks fluctuated dramatically this year, reacting to seemingly every shred of economic data. The Dow Jones Industrial Average ended 2010 at 11,569.33. As of Friday, it stood at 12,184.26 after a seesaw year.
As the year drew to a close, there were some signs of improvement, at least in the U.S. IHS Global Insight chief U.S. economist Nigel Gault said, “The U.S. economy continues to show improvement even as the picture for the rest of the world deteriorates.”
He noted that third-quarter GDP growth was revised down to 2 percent because inventories fell, but said that situation would support future production growth in order to keep pace with sales. IHS has upgraded its fourth-quarter growth forecast to 2.6 percent from 2 percent. As 2011 turns the corner, the presidential election looms and more gridlock is expected from Washington. But economists and historians often say an election year is good for the economy, as political skies clear, confidence grows and spending increases.