Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
January 2026
Macroeconomic Overview: Government data on consumer spending are still being delayed due to the government shutdown. The latest available figures are for September. Estimates for October and November are scheduled for release on January 22nd, meaning that official data covering the important holiday sales period are not yet available.
Several publicly available private reports have been released. Those estimates suggest consumers spent more during the holiday season, contradicting the more pessimistic forecasts released in the fall which called for year-over-year contraction.
Visa (the credit card company) reported that retail spending (excluding autos, gas, and food) was up +4.2% year-over-year (not adjusted for inflation). Their reporting indicated that while the bulk of spending continues to occur in physical locations (73% brick and mortar versus 27% online), most of the year-over-year growth stemmed from online sales. Adobe Analytics reports that online spending rose nearly seven percent year-over-year and set a record this holiday season.
The latest government data covering the labor market suggests further weakening. Since May, there has been only one month when the month-over-month change in payrolls exceeded +100,000 jobs and there have been three months when the net change in jobs was negative.
Concern about the labor market may prompt more changes in monetary policy. The Federal Reserve lowered interest rates a quarter of a percentage point at its latest meeting in December. In addition to its mandate to maintain employment near its maximum sustainable level, the central bank is charged with holding inflation near two percent. This official target is based on a price index tied to consumer spending data, which continues to be affected by the delays stemming from the government shutdown. The latest value for this series on inflation (September) was +2.8%. CPI data originate from another government agency, are derived from different methods, and the CPI schedule was less affected by the shutdown. The latest inflation rate according to the overall CPI was+ 2.7% (November).
Employment: The U.S. economy is estimated to have added +50,000 jobs in December. Revisions to figures for previous months were negative, with the values for October falling -68,000 from -105,000 to -173,000 and the figure for November falling -8,000 from +64,000 to +56,000. The current twelve-month average is +49,000 (Jan-Dec 2025). One year ago, the twelve-month average was +168,000.
The unemployment rate decreased marginally, from 4.5% to 4.4%. Wages were up +3.8% year-over-year in December. This was slightly higher than the rate in November (+3.6%), but wage growth has been trending lower. Despite the downtrend, wage growth remains higher than values experienced in the decade between the financial crisis and higher than inflation.
Consumer Confidence & Spending:The Conference Board’s Index of Consumer Confidence® slipped -3.8 points month-over-month to 89.1 in December. Although most decreases have been small, this represented the fifth straight monthly decline. For much of the time since 2021, values held within a range between 95 and 115. In each of the past two months, readings have been slightly below the lower end of that range.
As mentioned above, government figures on consumer spending have been delayed. The latest available data are for September and were covered in last month’s publication.
Consumer Prices & Import Data:As measured by the CPI for garments, average retail prices increased +0.7% between September and November (roughly month-over-month, no data for October due to the government shutdown). Contrary to expectations for higher retail prices after tariff increases, rates of year-over-year change in the apparel CPI have been flat to marginally lower. In August, there was no year-over-year change, but in all other months since April, prices were lower than one year ago. The magnitude of the year-over-year decreases has not been large, averaging only -0.3%, but the stability in retail prices contrasts with cost pressures from sourcing following this year’s tariff increases.
In 2024, the average tariff rate paid on U.S. apparel imports was 14.6% (based on data reported by the Census Bureau for HS Chapters 61 & 62). The latest available figure (September) was 30.4%, meaning that apparel tariffs have doubled over the first nine months of 2025. In terms of total sourcing costs (cost of goods plus tariffs), the payment for the average imported apparel item in September was up +20.5% relative to the average 2024. Over the same period, the cost of goods (excluding tariffs) increased slightly (+3.2%). The combination of slightly higher cost of goods, higher tariff rates, and steady year-over-year retail prices suggests margin pressure for U.S. retailers and brands.