Textile and Garment Professional Market Sentiment Index Nears Threshold, Signaling Pressure on Distribution

The May sentiment indices for textile and garment professional markets both fell below the 50 threshold, sending a clear signal of pressure on the distribution end. The manager index stood at 49.35, down 1.46 percentage points from April; the merchant index was 49.73, a slight increase of 0.02 percentage points. Both core indicators are below the boom-bust line, indicating that most market participants have a pessimistic perception of their operations.

Key sub-indices weaken across the board

On the manager side, the total business volume index fell to 49.03, down 1.62 percentage points month-on-month; the logistics dispatch volume index and foot traffic index both dropped to 48.39, each declining by 2.26 percentage points. These three indices collectively reflect a substantial cooling in market transaction activity. The store opening rate index rebounded by 1.61 percentage points to 49.03, but remained below the threshold, suggesting that the reduction in vacant stalls may stem more from merchants staying put passively rather than active expansion.

Merchant-side data is equally concerning. The sales volume index was 49.11, down 0.48 percentage points; the profit index fell to 48.97, a decline of 0.48 percentage points; the average selling price index edged up to 49.52 but stayed in contraction territory. Notably, the comprehensive cost index climbed to 50.82, up 1.64 percentage points, indicating that merchants' operating cost pressure has eased somewhat. However, the inventory index dropped to 49.79, down 0.55 percentage points, signaling that inventory overhang is worsening.

E-commerce growth slows, offline recovery remains weak

The e-commerce sales index showed clear divergence. The manager-side e-commerce sales index was 50.97, plunging 3.22 percentage points month-on-month; the merchant-side index was 50.14, down 0.75 percentage points. Although both indices remain just above the threshold, growth has slowed markedly. Only 16.13% of professional markets reported an increase in e-commerce sales, a sharp drop of 25.81 percentage points from April; the proportion of merchants with rising e-commerce sales was a mere 1.37%, down 8.22 percentage points.

Offline channels also lack bright spots. The share of markets reporting increased foot traffic was only 6.45%, down 6.45 percentage points from April; the share of markets with rising rents was 9.68%, also down 6.45 percentage points. This means market operators cannot gain confidence from foot traffic recovery nor improve revenue structure through rent increases.

Merchant operations under pressure, cost and inventory trade-off intensifies

From the merchant operating structure, worsening profitability and cost relief form a contradictory combination. The proportion of merchants with rising profits was merely 0.68%, a sharp drop of 7.54 percentage points from April; while the share of merchants with declining total sales was 10.96%, down 2.74 percentage points. The cost index rose above 50, indicating that more merchants have reduced operating costs by cutting expenses or optimizing supply chains, but at the cost of inventory pressure falling from above the 50 threshold into contraction territory.

This adjustment model of 'cutting costs, increasing inventory' reflects that final demand recovery has fallen short of expectations. Merchants are forced to sacrifice inventory turnover to maintain cash flow. If downstream procurement remains weak, it could trigger more aggressive price wars or destocking sales.

Forward-looking indices remain optimistic, but confidence is fragile

Despite weak current data, managers and merchants still maintain forward-looking indices above the 50 threshold for June. The manager forward index was 53.23, down 1.93 percentage points; the merchant forward index was 50.14, down 0.34 percentage points. Business environment indices also remained above 50.

This divergence between current weakness and optimistic expectations suggests that industry participants still pin hopes on the summer consumption season or policy stimulus to turn things around. But the continuous decline in forward-looking indices is a warning sign—if actual June data fails to meet expectations, market confidence could collapse faster.

Practical recommendations

For buyers - Current merchant inventory pressure is high, leaving room for price negotiation. Consider locking in low-cost supplies in batches to avoid forced price hikes during peak season. - Focus on product categories where inventory indices continue to decline; these face clearance risks and present opportunities to stock up on basic fabrics or conventional garments. - With e-commerce growth slowing and offline foot traffic weak, shorten procurement cycles and replace large bulk orders with small, frequent orders to reduce inventory risk.

For foreign trade companies - Weak domestic market sentiment may spill over to export orders. Consider shifting some domestic production capacity to export markets, especially Southeast Asia and the Middle East where demand is growing. - Monitor RMB exchange rate fluctuations' impact on export margins. The current window of cost relief is limited; accelerate forex settlement. - Leverage the fact that e-commerce sales indices remain above the threshold to expand cross-border e-commerce channels, hedging against the risk of shrinking offline orders.