Credit ratings agency Moody’s Investors Service has changed its outlook for the apparel industry to “positive” from “stable.”

This story first appeared in the March 30, 2012 issue of WWD. Subscribe Today.

The outlook represents expectations for business conditions in the apparel industry over the next 12 to 18 months.

According to analyst Scott Tuhy, the main reason for the change is lower cotton costs, which have fallen more than 60 percent over the past year. He also expects operating income to rise 7 percent to 8 percent for this year, compared with a previous forecast for 3 percent to 4 percent growth. Stronger growth is expected in the second half of 2012.

Tuhy also said Moody’s economists expect the U.S. economy to expand 1.5 percent to 2.5 percent in 2012 and 2 percent to 3 percent in 2013.

“We expect overall consumer spending will increase in line with the overall economy and that apparel purchases will grow in line with total spending,” he said.

One cautionary note: “Our outlook could also move back to stable, or even negative, if gas prices accelerate or economic conditions in the U.S. or Europe worsen, causing operating income growth to fall below 4 percent or turn negative.”

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