As originally published in California Apparel News on Feb. 8, 2024.

Darrin Beer, western regional manager for CIT Commercial Services, a subsidiary of First Citizens Bank, shares his perspective on how potential rate cuts in 2024 might impact the fashion industry.

Darrin Beer
Western Regional Manager
CIT Commercial Services—a subsidiary of First Citizens Bank

Many fashion retailers and manufacturers experienced a challenging year in 2023 as they continued to work through excess inventory levels. Additionally, several fashion companies had to deal with lower demand as consumers shifted spending toward services and travel.

The consumer price index has fallen from a 9.1 percent pandemic-era peak in June 2022 to a much lower 3.4 percent level in December 2023. Meanwhile, the Federal Reserve is still trying to manage a delicate balancing act, working to engineer a soft landing for the economy while also achieving its 2.0 percent inflation goal. Many economists who were hoping for several rate cuts beginning Q1 now feel that reductions won’t begin until late Q2.

Debt financing has become more expensive the last three years, a cumulative increase of over 5.0 percent. Also, many companies have carried higher loan amounts to finance excess inventories. Inventory management has always been a key in this industry and even more so lately. Supplier diversification is also important as there have been global disruptions and geopolitical unrest for the last few years.

Overall, the fashion industry has been very resilient in the face of constant change. While lower interest rates will be welcomed from the expense side, business owners must manage their companies with the expectation that retailers will continue to order conservatively until consumer demand improves. Manufacturers and retailers should be prepared when demand strengthens.

Link to original article: https://www.apparelnews.net/news/2024/feb/08/fashion-seeks-financial-relief-from-the-fed-in-2024/