Current Price Topics

The Impact of Soaring

Cotton Prices on 

Consumer Apparel Prices

1

Import and Export Prices: Second Quarter 2011

U.S. Bureau of Labor Statistics August 2011 Volume 2, Number 5

In March 2011, the world price of cotton 

peaked at levels not seen in more than 140 

years. Prices of cotton exports from the United 

States, the world's leading cotton exporter, 

surged nearly 300 percent in the 2-year period 

between March 2009 and March 2011. What 

caused these price hikes, unprecedented since 

the Reconstruction days following the Civil 

War? More importantly to the U.S. economy, 

what will be the ultimate impact on clothing 

and apparel prices for U.S. consumers?

Despite the fact that cotton is grown in 90 

countries around the world, the industry is 

relatively concentrated, with the top three 

producers—China, India, and the United 

States—accounting for more than 60 percent 

of total world production and consumption.1

Since the 1980s, the Chinese government has 

adopted various strategies to stimulate the 

cotton sector and increase productivity. China 

is now simultaneously the largest cotton producer and consumer in the world. The United 

States, by contrast, is the world's dominant 

cotton exporter and the third-largest producer after China and India. Last year, onethird of world exports were shipped from the 

United States. That number is projected to rise to 

nearly 42 percent for the 2010–11 crop year.2

 The 

United States is also the world's largest importer 

of apparel, with approximately 97 percent of its 

domestic sales supplied from abroad.3

Export Cotton

The drastic price increases for cotton over the 

past 2 years were preceded by a signifi cant 

decline. From March 2008 through March 

2009, export cotton prices decreased 32.5 

percent. (See chart 1.) The drop was due to 

the impact of the 2008 global economic and 

fi nancial crisis on cotton consumption levels. 

Troubled by the possible eff ects of weak local 

demand on cotton growers, the Chinese and 

Indian governments increased their purchase 

of domestic stock by early 2009 in order to 

bolster price levels. Despite being the world's 

largest cotton producer, China consumed 

more cotton than it produced from 2009 to 

2010, leading to an increase in its demand 

for exported U.S. cotton. In turn, U.S. exports 

exceeded production levels and the price 

trend changed course. From March 2009 to 

March 2010, export cotton prices increased 

56.9 percent. 

For the 2010–11 growing season, cotton 

shortages resulting from unfavorable weather 

conditions in Pakistan, China, and the United 

States ensured not only that prices continued 
2

 CURRENT PRICE TOPICS

to rise, but that they did so to unprecedented 

levels. A continued ban on export cotton instituted by the Indian government in April 2010 

caused the international supply to tighten 

even more. In addition, a weaker U.S. dollar, 

high prices for other agricultural commodities (which limit the land used for growing 

cotton), investor speculation, and increased 

postrecession consumption levels combined 

to push prices even higher. In the span of a 

year, from March 2010 to March 2011, export 

cotton prices grew at an average monthly rate 

of 8.1 percent and 153.8 percent overall. The 

sharp rise in U.S. cotton exports since September 2010 also has had the eff ect of reducing 

domestic inventories. The stock-to-use ratio 

fell to 12 percent for 2010–11, the lowest level 

since 1925.4

Recently, higher prices have aff ected the 

global market as demand has waned and 

prices have inched downward. Since peaking in March 2011, U.S. export cotton prices 

have decreased 24.3 percent. Export volumes 

also have dropped noticeably, due in part to 

severe drought conditions aff ecting 

the U.S. crop yield and to textile producers 

tapping into inventories rather than importing new supplies, in the hope that prices will 

fall further.5

The gradual recovery from the 2008 economic 

and fi nancial crisis led to higher demand for 

import apparel, and subsequently import 

cotton apparel prices also rose, albeit less 

dramatically. Since December 2009, cotton 

apparel prices advanced 11.4 percent.

1,000

1,500

2,000

2,500

100

150

200

250

300

350

400

Trade volume 480Ͳlb bales (in

Index value (2000= 100) thousands)

Chart 1.U.S. cotton exports: price index and volume, March 2008–June 2011

0

500

0

50

Mar

2008

Jun

2008

Sep

2008

Dec

2008

Mar

2009

Jun

2009

Sep

2009

Dec

2009

Mar

2010

Jun

2010

Sep

2010

Dec

2010

Mar

2011

Jun

2011

Trade volume of cotton exports Export cotton price index

SOURCE: U.S. Bureau of Labor Statistics
3

 CURRENT PRICE TOPICS

 (See chart 2.) In addition to the record-high 

cotton prices, other factors have contributed 

to the rising price of U.S. textile imports, 

including rising transportation costs, a stronger Chinese yuan, and increased labor costs 

in China.6 There is now concern that these 

high prices for imported apparel could pass 

through to domestic apparel prices, thus directly aff ecting the U.S. consumer. 

China is the dominant supplier of apparel to 

the United States. In 2010, China provided 

up to 40 percent of total U.S. apparel imports 

and 33 percent of total cotton apparel 

imports.7

 Although domestic apparel retailers 

try to avoid passing the rising cost of raw 

materials directly to the consumer, pressure 

has mounted from several sources, making 

it harder for retailers to continue to absorb 

increasing costs. One of these sources is 

China’s increasingly competitive labor market, 

which has led workers to demand better pay. 

Labor accounts for more than 20 percent 

of the total cost in textile manufacturing. 

Also, higher salaries in China have led to 

increased domestic demand, which in 

turn has contributed to a runup in prices. 

Meanwhile, U.S. retailers have been switching 

to pieces with a greater blend of fabrics, 

thereby reducing the eff ect of cotton prices 

on apparel. However, the greater demand for 

other natural and artifi cial fi bers, polyester in 

particular, has forced prices to rise in those 

industries as well.

100

105

110

115

Index value (2000= 100)

Import apparel prices Consumer apparel prices

Chart 2.U.S. cotton apparel import prices and seasonally adjusted consumer

90

95

Jun

2009

Aug

2009

Oct

2009

Dec

2009

Feb

2010

Apr

2010

Jun

2010

Aug

2010

Oct

2010

Dec

2010

Feb

2011

Apr

2011

Jun

2011

SOURCE: U.S. Bureau of Labor Statistics
4

 CURRENT PRICE TRENDS

All this has implications for the U.S. consumer 

market. Current projections by the American 

Apparel and Footwear Association point to 

upcoming hikes in domestic prices for fall 

2011.8 At the same time, the seasonally adjusted Consumer Price Index (CPI) for apparel less 

footwear rose 2.2 percent in the 12-month 

period through June 2011. Historically, there 

has been a lag in the eff ect of higher import 

prices on domestic markets, and in the case of 

apparel the pass-through eff ect is very often 

averted. However, consumer apparel prices 

have been on the rise over the past 3 months, 

and they bear watching in the near future.

Import Prices

During the second quarter of 2011, import 

prices increased 2.1 percent, after rising 6.3 

percent during the fi rst quarter of the year. 

The second-quarter increase was driven by 

a 5.1-percent advance in prices for fuels and 

lubricants. The price index for nonfuel imports 

also contributed to the rise in import prices, 

advancing 1.0 percent during the second 

quarter of the year.

Fuel Import Prices

During the second quarter of 2011, prices for 

fuel imports rose 5.1 percent, the smallest 

increase since the third quarter of 2010, when 

prices rose 0.5 percent. The quarterly increase 

was the result of a 7.6-percent advance in fuel 

import prices during the month of April. For 

the months of May and June, prices declined 

0.8 percent and 1.6 percent, respectively. 

Petroleum prices rose 8.1 percent in April, a 

large enough increase to drive fuel import 

prices up for the quarter, despite subsequently declining 0.9 percent in May and 1.6 percent in June. Continued political unrest in the 

Middle East, especially in OPEC member nation Libya, was a major contributor to the rise 

in petroleum prices. Fighting in Libya intensifi ed in April, with the forces of Muammar Gaddafi and the antigovernment opposition fi ghting for control of strategic oil fi elds around the 

city of Berga.9

 Signs of an economic recovery 

in the United States also contributed to the 

rise in the price of petroleum in April. News 

that the unemployment rate dropped and 

that the economy added more than 200,000 

new jobs bolstered the sentiment that crude 

demand prices would start to rise.10

May and June brought declines in petroleum 

prices. Although political unrest in the Middle 

East was still an issue of concern in May, it was 

trumped by a rise in U.S gasoline stocks and 

a strengthening of the U.S dollar. Both factors 

brought about a decline in petroleum prices, 

the fi rst since the third quarter of 2010. In 

June, the United States and 27 other countries 

released 60 million barrels of oil from their 

Current Price Trends

Quarterly Price Highlightss
5

 CURRENT PRICE TRENDS

reserves in an attempt to off set the disruption 

of oil supplies from Libya.11 Coupled with rising concerns about European debt, the result 

was a decline in petroleum prices for a second 

straight month. Natural gas fell 0.3 percent 

during the second quarter of 2011.

Nonfuel Import Prices

The price index for nonfuel imports rose 1.0 

percent during the second quarter of 2011, 

the ninth consecutive quarter the index 

increased. As illustrated in Chart 3, rising 

prices for industrial supplies and materials, 

excluding fuel, and for consumer goods were 

the major contributors to the overall increase 

in nonfuel prices. Rising prices for automotive vehicles, as well as for capital goods, had 

a less signifi cant impact, although they did 

contribute to the overall increase, while prices 

for foods, feeds, and beverages declined for 

the quarter.

Prices for industrial supplies and materials, 

excluding fuels, increased 2.8 percent in the 

second quarter of 2011. Higher prices for plastic materials, nonmonetary gold, and precious 

metals, which rose 9.6 percent, 9.9 percent, 

and 6.1 percent, respectively, led the advance 

for the quarter. With a large amount of economic uncertainty, gold and other precious 

metals have become an attractive refuge for 

investors.12 Plastic materials prices had been 

driven up by higher petroleum prices in 

0.15

0.11

0.49

Ͳ0.04

Automotive vehicles

Capital goods

Industrial supplies and materials, excluding fuel

Food, feeds, and beverages

Chart 3.Major contributors to the 1.0Ͳpercent increase in import prices, excluding fuel,

second quarter 2011

0.28

0.15

Ͳ0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60

Consumer goods, excluding automotives

Automotive vehicles

Percent change contribution SOURCE: U.S. Bureau of Labor Statistics

NOTE: Due to rounding, figures do not add to total.
6

 CURRENT PRICE TRENDS

previous months.

In the second quarter of 2011, the price index 

for consumer goods, excluding automotives, 

advanced 0.9 percent, the largest increase 

since a similar 0.9-percent advance in the second quarter of 2008. As mentioned in the fi rst 

section of this report, cotton prices have had 

a signifi cant impact on the index. Prices for 

cotton apparel increased 2.8 percent during 

the quarter. 

The price index for foods, feeds, and beverages decreased 0.6 percent in the second quarter, despite having increased 2.0 percent in 

April. The quarterly decline was the fi rst since 

the index fell 3.7 percent during the fi rst quarter of 2009. Falling prices for vegetables were 

the primary catalyst for the index’s decline. 

The commencement of the growing season 

in the United States brought about a decline 

in prices as greater quantities of vegetables 

became available on the market. Prices for 

automotive vehicles, parts, and engines rose 

1.1 percent, the largest quarterly increase 

since a similar 1.1-percent advance in the 

second quarter of 1995. The price index for 

capital goods rose 0.6 percent.

Export Prices

The overall export price index rose 1.2 percent 

during the second quarter of 2011, following 

a 4.1-percent increase during the previous 

0.02

0.29

0.91

Automotive vehicles

Capital goods

Nonagricultural industrial supplies and materials

Chart 4. Major contributors to the 1.5Ͳpercent increase in export prices

0.23

0.00 0.20 0.40 0.60 0.80 1.00

Consumer goods, excluding automotives

Percent change contribution SOURCE: U.S. Bureau of Labor Statistics

NOTE: Due to rounding, figures do not add to total.
7

 CURRENT PRICE TRENDS

quarter. The most recent advance marked 

the ninth consecutive quarter that export 

prices rose. Prices for nonagricultural exports 

increased 1.5 percent in the second quarter, 

while prices for agricultural commodities had 

a mitigating impact on the movement of overall exports, declining 0.9 percent. 

Agricultural Export Prices

The second-quarter decline in agricultural 

prices was the result of decreases in a wide 

range of product prices in May. As a whole, 

prices fell 2.0 percent during the month. One 

of the most signifi cant contributors was the 

price of cotton. Prices fell sharply, declining 

24.3 percent in the second quarter. Higher 

grain prices in the second quarter off set the 

falling cotton prices somewhat, although the 

advances were small compared with those 

of the previous 12 months. Corn prices rose 

4.8 percent after increasing 76.6 percent over 

the previous 12 months, soybean prices advanced 0.8 percent for the quarter following a 

43.0-percent rise over the March 2010–11 period, and wheat prices increased 1.8 percent 

after advancing 73.1 percent between March 

2010 and March 2011. 

Nonagricultural Export Prices

The price index for nonagricultural exports 

increased 1.5 percent in the second quarter of 2011, the ninth consecutive quarterly 

increase. As can be seen in chart 4, the index 

was driven up primarily by rising prices for 

nonagricultural industrial supplies and materials, which advanced 2.4 percent in the second 

quarter. Higher prices for capital goods and 

consumer goods, also contributed to the 

increase, although their impact was much 

less signifi cant. Although the price index for 

automotive vehicles increased, it was of such 

a minor amount as to have little impact on the 

price index for nonagricultural exports.

The increase in nonagricultural prices took 

place in the early part of the quarter, and by 

June prices declined. In April and May, the index increased 2.2 and 0.9 percent, respectively. A wide range of commodities was responsible, as prices for fuel oil, plastic materials, 

steel mill products, and gold all rose. Falling 

prices for fuel oil, plastics, and natural gas in 

the month of June had a mitigating impact.

Capital goods prices rose 0.6 percent over 

the same period, after ticking up 0.1 percent 

during the fi rst quarter of 2011. The secondquarter increase was the largest since the 

index rose 0.8 percent in the second quarter 

of 2008. A wide range of items recorded price 

advances during the fi rst 2 months of the 

quarter, attributable largely to rising costs for 

materials. The price index for consumer goods 

rose 1.9 percent in the second quarter of 

2011, the largest gain since a similar advance 

of 1.9 percent in the fi rst quarter of 1988. Driving up the index were higher prices for jew-
8

 CURRENT PRICE TRENDS

Notes

1

 The United Nations Conference on Trade and Development estimates that cotton was grown in 90 countries in 2007.

2

 “U.S. Cotton Market Monthly Economic Letter—July 13, 2011,” Cotton Incorporated, http://www.cottoninc.com/MarketInformation/MonthlyEconomicLetter/#top. 

3

 The fi gure is from 2008. (See American Apparel and Footwear Association, https://www.apparelandfootwear.org.) 

4

 U.S. Department of Agriculture: Cotton: World Market and Trade Archives, http://www.fas.usda.gov/cotton/circular/2010/November/cotton_full11-09.pdf.

5

 U.S. Department of Agriculture: Cotton: World Market and Trade, July 12, 2011, http://usda.mannlib.cornell.edu/usda/fas/

cotton-market//2010s/2011/cotton-market-07-12-2011.pdf.

6

 Jon Hilsenrath, Laurie Burkitt, and Elizabeth Holmes, “Change In China Hits U.S. Purse,” The Wall Street Journal, Tuesday, June 

21, 2011. 

7

 Department of Commerce, International Trade Administration, “Major Shippers Report, U.S. General Imports by Country” July 11, 

2011, http://otexa.ita.doc.gov/msrcty/a5700.htm.

8

 Hilsenrath, Burkitt, and Holmes, “Change In China.” 

9

 See “Oil Prices Hit Highest Level Since 2008,” The Sydney Morning Herald, Apr. 8, 2011.

10 See “Oil Rises to Above $108 as US Jobs Market Improves,” The Associated Press, Apr. 4, 2011.

11 See “Oil Prices Plunge After U.S., Allies Announce Release of Reserves,” The Washington Post, June 23, 2011.

12 See “Precious Metals: Investors Seeking Refuge Boost Gold, Silver,” The Wall Street Journal, Apr. 8, 2011. 

elry, gem stones, and textile apparel.

For more information, contact Esteban 

Balseca at (202) 691-7123 or by email 

(balseca.victor@bls.gov), or Edwin Bennion 

at (202) 691-7142 or by email (bennion.

edwin@bls.gov)