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Factors constraining growth in the U.S. market

February 1st, 2012 / By: / Uncategorized

Despite encumbrances to growth, the U.S. economy is recovering, due in large part to unprecedented stimulus measures, but the rate of expansion began to moderate in the second quarter of 2010. Unfortunately, the level of GDP growth falls far short of the 3.5 percent rate economists say is needed to reduce the unemployment rate. Improvement is expected to be slow and gradual. As the slow recovery continues its journey over the next few years, prudence and patience will be required for specialty fabric industry participants as they develop and execute their business plans in the future.

Here are the factors constraining growth in the U.S. market:>/p>

  1. Tight credit. Congress passed a bill in September 2010 that creates a $30 billion fund designed to help small banks lend funds to small businesses, so this might improve in 2011. But the credit lending market remains tight and has significantly constrained investment activity.
  2. High unemployment. Unemployment averaged 9.6 percent in 2010 resulting in a decrease in consumer spending—a trend that is expected to continue in 2011.
  3. High raw material costs. Oil prices in particular remained high in 2010 ($79 per barrel on average) and are projected to be even higher in 2011.
  4. Import/pricing pressures. Worldwide imports of specialty fabrics have increased 23 percent as of November–YTD 2010. Imports of commodity specialty fabrics have adversely affected the sales and profitability of U.S. players in the traditional specialty fabric markets such as tents, awnings, fabric graphics and tarps. Higher-end markets (safety and protective, military textiles and medical textiles) tend to be more insulated from the effects of these imports.
  5. The need to increase export sales. U.S. specialty fabric exports were down 16 percent in 2009, but increased 29 percent in 2010 versus 2009 figures—albeit at the expense of a weak dollar, which was further devalued when the Federal Reserve pumped $600 billion more dollars into the U.S. economy in early November 2010. Buttressed by President Obama’s plan to double U.S. exports in the next five years, the hope for 2011 is that increases in exports will continue, credit will be more available and there will be better enforcement of trade rules.

The State of the Industry is an annual look at the status of the U.S. specialty fabrics industry based on IFAI research. A more comprehensive and updated analysis, with detailed information on specific markets, will be available for purchase from the IFAI bookstore in April.
Contact Jeff Rasmussen, IFAI market research manager, at +1 651 225 6967 or jcrasmussen@ifai.com.

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