The August 2026 data for China's cotton textile sector reveals an uncomfortable divergence for mill managers: the raw material procurement index rose 0.9 percentage points month-on-month to 51.1%, while the production index fell 0.4 points to 49.7%. Spinners are actively locking in raw materials but not matching that enthusiasm with higher loom utilization. The contrast between upstream buying and midstream restraint is stark.
Cost-Driven Procurement Warmth
The prosperity index, compiled from nearly 500 cotton textile mill responses by the China Cotton Textile Association, stood at 49.6% in August, edging down 0.1 points from July and remaining in contraction territory. The raw material side was the month's most prominent feature. The average spot price for grade 3128 cotton reached 17,680 yuan per tonne, up 1.95% month-on-month. 1.4D direct-spun polyester staple fiber averaged 7,662 yuan per tonne, a gain of 3.40%. Mainstream viscose fiber averaged 14,241 yuan per tonne, up 0.15%.
Zhengzhou cotton futures touched a high of 17,345 yuan per tonne in August, driven by overseas US cotton trends, new crop production expectations and weather disruptions. Polyester staple fiber's rise came mainly from cost pass-through — the expanding US-Iran conflict pushed oil prices higher, and alternating tightness in PTA and MEG supplies quickly lifted fiber prices from around 7,500 yuan to 8,200 yuan per tonne.
This broad-based raw material rally means the pricing window for buyers is narrowing. Yet the cotton procurement index remained below the threshold at 49.9%, while the non-cotton fiber procurement index held at 50.1%. The substitution effect of chemical fibers over cotton becomes more pronounced as the price spread widens, a trend worth monitoring.
Uneven Production and Inventory Signals
In contrast to procurement warmth, production indicators weakened. The loom utilization index fell to 49.6%, and the fabric output index dropped sharply by 2.9 percentage points to 48.0%, while the yarn output index edged up to 51.0%. The yarn-strong, fabric-weak pattern indicates that weaving mills are absorbing orders less effectively than spinning mills, and greige inventory pressure is transmitting upstream.
The product inventory index fell to 49.3%, down 0.9 points from July. The fabric inventory sub-index dropped 2.5 points to 49.3%, while the yarn inventory sub-index rose slightly to 49.3%. The inventory decline is not entirely due to smooth destocking; part of it reflects weaving mills proactively reducing operations to control finished goods accumulation.
On the price side, the average monthly price for 32-count combed cotton yarn was 23,568 yuan per tonne, up 0.86% month-on-month, while pure cotton greige fabric averaged 7.36 yuan per meter, up only 0.27%. Yarn price gains significantly outpaced fabric, meaning weaving margins are being squeezed and the cost pass-through channel to downstream is not smooth.
Peak Season Expectations vs. Confidence Gap
The confidence index recovered 0.9 points from July but remained deeply contractionary at 46.7%. The business operation index barely held above 50 at 50.1%, yet the revenue index fell 2.8 points to 49.8%, while the profit index rose 1.3 points to 50.3%. Falling revenue alongside improving profit may stem from raw material inventory appreciation rather than better core operations, raising questions about the sustainability of this profit quality.
Downstream orders began gradually in mid-August but remained generally weak, with new order inflows lacking. Downstream acceptance of high-priced raw materials is limited — inquiries are plentiful but firm orders are scarce, leaving the traditional peak season's strength yet to be verified. Global manufacturing PMI has stayed above the boom-bust line for 13 consecutive months, and China's manufacturing PMI rebounded to 49.8%, but a time lag persists between macroeconomic warmth and the micro-level experience of cotton textile firms.
For buyers, current raw material prices have priced in considerable optimism, raising the risk of chasing highs. For mills, yarn profitability exceeds fabric, making a product mix tilt toward yarn a short-term strategy. For exporters, if cost increases cannot be passed on to overseas buyers, order-taking pace requires greater caution.