Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
August 2025
Macroeconomic Overview: August 1st was the extended deadline for negotiations around trade and tariffs. A few deals were announced before that deadline, and an extended list of assigned tariff rates was released by the U.S. government on July 31st (list of rates by country in Annex I at the bottom of the Executive Order No. 14257, as amended). The average increase described in the July 31st list is near twenty percent points, which is halfway between the ten-point baseline rate that was assigned to most countries over the past few months and the 30-point increase that has been in effect for China since May 14th.
There was also a string of macroeconomic data released in the last week of July. The U.S. Bureau of Economic Analysis published its first estimates for GDP growth in the second quarter. Those figures indicated that the U.S. economy expanded at a +3.0% annualized rate between April and June. In the first quarter, the annualized rate was a -0.5% contraction. In 2024, annual growth was +2.8%.
The acceleration in growth in GDP in the second quarter was a partial result of a decrease in imports. In the equation that defines GDP, imports are subtracted, so lower imports can contribute to higher GDP. With changes in trade policy, imports have been volatile. In the first quarter, imports increased at a +37.9% annualized rate. This has been attributed to businesses bringing in more goods ahead of potential tariff increases. In the second quarter, imports pulled back as tariff increases were implemented, and imports fell at a -30.3% rate. Most of the swing in imports was for goods (rather than services), which have been a focus for changes in tariff rates. Annualized rates of change for the imports of goods were +51.6% in the first quarter and -35.3% in the second quarter.
Consumer spending, another element of the equation defining GDP, also accelerated in the second quarter, rising from an annual rate of +0.5% in the first quarter to +1.4% in the second quarter. In the 2024 calendar year, consumer spending rose +2.8%.
The inflation measure most closely tracked by the Federal Reserve is updated alongside monthly estimates for consumer spending. The latest reading +2.8% (June), virtually unchanged relative to where it was in May and virtually equal to the latest six- and twelve-month averages. The Fed’s official target for this data series is two percent. Due to lingering concerns about inflation, the Federal Reserve decided to hold interest rates steady at its meeting near the end of July. There were a couple of members on the interest rate committee that voted to lower rates. The Fed’s next meeting on interest rates is in September. A slower job market may provide more support for a rate reduction.
Employment: The U.S. economy was estimated to have added +73,000 jobs in July. Revisions to previous months were negative, with the figure for May dropping -125,000 to +19,000 and the figure for June falling -133,000 to +14,000. These changes indicate that hiring was significantly slower than previously estimated (off by more than 250,000 jobs over the past two months). The current 12-month average for job growth is +128,000. The current six-month average is +81,000. The unemployment rate increased slightly month-over-month, from 4.1% to 4.2%. It has held between 4.0% and 4.2% since May 2024.
Average hourly earnings rose +3.9% year-over-year in July. Since March 2024, the rate of wage growth has been steady between 3.9% and 4.2%. While the range moved lower following the post-COVID and post-stimulus peak of +5.9% set in March 2022, it remains more than a full percentage point above the inflation rate.
Consumer Confidence & Spending: The Conference Board Consumer Confidence Index® increased slightly in July (+2.0 points to 97.2). After a dip in April that resulted in the lowest reading since the pandemic, it returned to the range between 95 and 115 that contained values for most of the past three and a half years.
Overall consumer spending was flat month-over-month in June (+0.1%). Year-over-year, overall spending was +2.1% higher. The annual rate of spending growth has been slowing. The rate posted in June was the slowest since February 2024. Spending on garments increased +0.3% month-over-month in June, following a strong +1.1% monthly increase in May. Year-over-year, spending on apparel was up +4.2%. The annual rate of clothing spending growth has been above four percent in every month since March. Longer-term average growth for apparel spending is near two percent.
Consumer Prices & Import Data: On a monthly basis, average retail prices for apparel increased slightly in June (+0.4%), following two month-over-month decreases (-0.1% in April and -0.4% in May). In terms of year-over-year change, the CPI for garments decreased for a third consecutive month (-0.5% month-over-month April, -0.7% in May, and -0.4% in June).
Since tariff increases were implemented in April, apparel import volumes have been volatile. In April, the all-fiber weight volume for imports was up +14.7% year-over-year. In May, volumes were down -11.1%. In June, shipments were +3.5% higher. In the six months before April, the weight volume of apparel imports was up +15.7%.