Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
May 2026
Macroeconomic Overview: Impacts stemming from the Iran War continue to be a dominant concern for economies around the world. Markets in Asia are grappling with physical constraints on energy supply, while others, like the U.S., which have ample domestic energy production are still dealing with higher costs.
In the U.S., gasoline prices are a widely watched economic indicator. The latest weekly national average for gas was $4.45/gallon, which is the highest since the spike in 2022 (when prices set the highest recorded nominal terms – not inflation-adjusted) value of $4.87/gallon for the price series tracked by the U.S. Energy Information Administration. Before the conflict, in early 2026, average gasoline prices were below $3.00/gallon. Energy, like food, represents a non-discretionary category of consumer spending. As a necessity, when prices for energy or food increase, there can be less left over to spend on more discretionary categories, which can include textiles and apparel.
Tradeoffs imposed by higher prices for necessities can affect consumer attitudes, and consumer confidence had moved lower before the conflict. The Conference Board Index of Consumer Confidence® has been holding at levels near those registered during the COVID era since April 2025 (values for this index were lower that these levels around the financial crisis). A separate measure of consumer attitudes, the University of Michigan Index of Consumer Sentiment, set new record lows in the latest two readings (for April and May). Apart from these recent readings, the previous low was set in June 2022 (this value was lower than those for this index that were posted around the financial crisis). In June 2022, average gasoline prices set a record (non-inflation-adjusted terms).
Data on consumer spending are lagged relative to releases for consumer attitudes, with the latest readings for March. This may mean that the effects of the war have yet to be recorded in government spending data. Nonetheless, the downturns in indexes of consumer attitudes have been in place for some time (both indexes shifted lower in the spring of 2025), and there has not been a definitive downturn in consumer spending. Consumer spending on apparel has been particularly strong, with year-over-year growth at five percent or more in many months since the start of 2025. More recently, annual growth rates have slowed, but that is due in part to the difficulty comparing against the strong levels from one year ago.
Employment: The U.S. economy is estimated to have added +115,000 jobs in April. This was the second consecutive monthly gain over 100,000 jobs, which had not happened since the end of 2024. Revisions to previous months were mixed, with the figure for February decreasing (-23,000 to -156,000) and the figure for March increasing (+7,000 to +185,000). The current twelve-month average for job gains is now +21,000. For the twelve-month period ending in April 2025, growth averaged +80,000.
The unemployment rate was unchanged at 4.3% in April (was 4.4% in February). It has been between 4.0% and 4.5% since the middle of 2024. Levels below five percent are low by historical standards. Excluding the volatility around COVID, the current period below five percent is the longest since the 1960s.
Wage growth accelerated in April (from +3.4% in March to +3.6%). The twelve-month average is +3.8%. Wage growth has outpaced inflation for most of the months since 2023, but the prince inflator used by the Federal Reserve was higher in March.
Consumer Confidence & Spending: The Conference Board’s Index of Consumer Confidence® was nearly unchanged month-over-month in March (+0.6 points to 92.8). It has been holding near this level since the first quarter of 2025.
Consumer spending decelerated in March, with overall expenditures decelerating month-over-month from +0.3% to +0.2% and year-over-year rates slowing from +2.7% to +2.1%. Spending on apparel decreased -0.6% month-over-month but was up +3.1% year-over-year – on top of a +6.9% annual rate of increase one year ago.
Consumer Prices & Import Data: The CPI for garments increased by one percent or more month-over-month for second consecutive time in March (up +1.8% month-over-month in February and up +1.0% month-over-month in March). Year-over-year, average retail prices were +3.2% higher. This is the strongest rate of annual increase since 2023. Current clothing prices levels are the highest since the 2000s, with the recent surge pulling prices farther away from the other recent period of higher clothing prices that was experienced in the early 2010s.
The tariff situation continues to evolve. After the Supreme Court ruled that IEEPA (International Emergency Economic Powers Act) did not justify many of the tariff increases in 2025, refunds are scheduled to start being issued May 12th (Customs and Boarder Protection’s portal started processing applications April 20th). Immediately following the Supreme Court’s decision, an alternate legal justification for tariffs (under Section 122 of the 1974 Trade Act) was used to implement 10 percentage point increases beyond 2024 levels. On May 7th, a trade court challenged the applicability of Section 122 for tariffs. However, these rare increases remain in effect, and an appeals process is underway.
