Consumer purchasing power is being eroded. U.S. inflation hit 3.8% in March, while average hourly earnings grew only 3.5%—the first time in three years that price increases outpaced wage growth. For the textile industry, this means the most fundamental support for end-market demand is weakening.
Consumer Side: Discretionary Spending Under Pressure
When necessities become more expensive, consumers typically cut back on non-essential items like apparel and home textiles. Public data shows that the share of clothing in U.S. personal consumption spending has dropped from 3.2% in 2021 to 2.9% currently. With 3.8% inflation and wage growth lagging, real disposable income is shrinking. Major U.S. retailers have begun scaling back spring apparel orders, with some department stores planning to reduce fall purchases by 10%-15%.
This transmission is not linear. Upstream yarn and fabric mills typically feel the pressure one to two quarters later. As 2024 fall/winter fabric orders are being negotiated, continued weak consumption will push brands and retailers toward smaller, more frequent orders rather than long-term commitments. This shift will further compress margins for weaving mills that rely on scale.
Industrial Clusters: Export Orders Face Dual Squeeze
Chinese textile exporters face two variables: shrinking U.S. demand and RMB exchange rate fluctuations. In Q1 2024, China's textile and apparel exports to the U.S. fell about 4% year-on-year, with apparel declining more than fabrics. Export enterprises in Keqiao and Shengze report fewer inquiries for U.S.-bound orders, tighter delivery schedules, and stricter payment terms.
Inventory cycles add another layer. U.S. wholesalers' apparel inventories have remained elevated since Q4 2023, and destocking is slow. Inflation-driven consumer caution will prolong this cycle. Even if end demand stabilizes, restocking at the wholesale level will lag.
Raw Materials: Divergent Paths for Polyester and Cotton
Inflation's impact on raw materials is not uniform. Crude oil prices remain supported by inflation expectations, keeping polyester and nylon costs elevated. Cotton, however, is more driven by demand expectations; ICE cotton futures have fallen about 8% from March highs. This divergence will force fabric mills to adjust their material mix—polyester-based fabrics will hold firmer pricing, while pure cotton products face greater bargaining pressure.
For dyeing and finishing, energy and chemical auxiliary costs are also rising. Some dyeing mills in Zhejiang and Jiangsu have raised processing fees by 5%-8%, but downstream fabric buyers are resisting. Margins in the processing segment are being squeezed from both sides.