China's May PPI hit a four-year high year-on-year, but the month-on-month growth rate suddenly halved. According to the latest data from the National Bureau of Statistics, the national producer price index rose 3.9% year-on-year in May, expanding from 2.8% in April. However, the month-on-month increase was only 0.5%, down sharply from 1.7% in April. For the textile industry, this mixed signal means that the driving force of upstream cost inflation is weakening, and whether downstream demand can take over has become the key variable.
Upstream Price Engine Stalls: Chemical Fiber and Petrochemical Chains Cool First
The direct impact came from the slowdown in international crude oil price increases. In May, the month-on-month price of oil extraction turned from a 24.1% increase in April to a 1.8% decrease, and the price of refined petroleum product manufacturing also turned from a 19.0% increase to a 0.3% decrease. As the upstream of textile raw materials, the reversal of the petrochemical chain quickly transmitted to the chemical fiber sector: the price growth of chemical fiber manufacturing fell by 4.1 percentage points month-on-month, and that of chemical raw materials and chemical products manufacturing fell by 6.3 percentage points. This means that the cost logic that previously supported the price increases of polyester, nylon, and other chemical fiber varieties is loosening.
For major chemical fiber fabric producing areas such as Shengze and Keqiao, this change will directly affect raw material procurement costs. If international oil prices continue to fluctuate at low levels, the quotation space of chemical fiber enterprises to downstream will be compressed, and traders who hoarded goods earlier may face inventory impairment risks.
Structural Divergence Intensifies: New Economy vs. Old Capacity
In contrast to the cooling petrochemical chain, the demand from the new economy represented by AI and computing power is still pushing up the prices of non-ferrous metals and electronic components. In May, the year-on-year price of non-ferrous metal mining and dressing surged 36.5%, non-ferrous metal smelting and rolling processing increased 24.0%, and optical fiber manufacturing prices rose 8.0% month-on-month. These price increase areas have limited correlation with the textile industry, but they reflect a deep-seated issue: the upward momentum of industrial prices is shifting from traditional bulk commodities to technology-intensive industries.
The textile industry is a typical "midstream manufacturing" sector: its price trend is affected by both upstream raw material costs and downstream consumer demand. The current divergence between PPI and CPI is obvious—the May CPI only rose 1.2% year-on-year, and the core CPI rose 1.1%—indicating that upstream price increases have not been effectively transmitted to terminal consumer goods. For textile companies, this means that fabric ex-factory prices are difficult to increase simultaneously, and profit margins are being squeezed from both sides.
Seasonal Demand Provides Limited Hedge
The May PPI month-on-month data is not without bright spots. With the start of "summer peak" demand, the price of coal mining and washing increased 3.2% month-on-month, and the prices of household air conditioners and refrigeration appliances rose 0.9% and 0.3% respectively. However, this seasonal support has limited effect on the textile industry—home textiles, apparel, and other categories have not seen obvious price rebounds.
Feedback from industrial clusters shows that the Nantong home textile market has recently seen orders mainly for rigid replenishment, lacking large orders; the operating rate of Shaoxing printing and dyeing factories remains at about 70%, and some companies have begun to lower processing fees to win orders. This indicates that against the backdrop of poor cost transmission, the problem of overcapacity has resurfaced.