In May 2026, China's cotton textile sentiment index fell to 49.9%, down 0.1 percentage points from April, slipping back into contraction territory. While the decline is modest, the divergence between global manufacturing PMI expansion and China's domestic PMI retreat to the threshold highlights a critical juncture for the industry.
Raw Material Dynamics: Cost Transmission Diverges
The raw material procurement index stood at 50.2%, still above the boom-bust line but dropping 2.5 percentage points month-on-month, signaling a marked cooling in purchasing activity. Cotton procurement index plunged to 47.3%, down 6.5 percentage points, reflecting mills' reluctance to restock ahead of the off-season.
On pricing, domestic 3128-grade cotton averaged 17,373 RMB/ton in May, up 504 RMB/ton or nearly 3% month-on-month. However, the main CF2609 contract hit a year-high of 16,955 RMB/ton on May 5 before retreating to 15,855 RMB/ton, with a volatility range over 6%. This futures-spot divergence indicates weakening acceptance of high-priced cotton, as downstream weavers prefer to digest existing inventories.
For chemical fibers, polyester staple fiber prices fell from 8,400 to 7,700-7,800 RMB/ton amid oil price volatility, averaging 8,027 RMB/ton, down 1.83% month-on-month. Viscose staple fiber remained firm at an average of 14,035 RMB/ton, up 2.37%, but trading volumes were tepid as downstream non-cotton fiber reserves were already ample.
Production: Utilization Improves but Inventories Build
The production index rose to 50.3%, up 0.9 percentage points, with yarn and fabric output indices at 50.1% and 51.4% respectively. Yet the equipment utilization rate index remained in contraction at 49.5%, indicating incomplete capacity recovery.
More concerning is the product inventory index, which plunged to 48.0%, down 3.2 percentage points. Yarn and fabric inventory indices fell to 48.7% and 46.8%, both below the boom-bust line and worsening from April. This suggests that while output increased, sales failed to keep pace, leading to passive stock accumulation.
The product sales index came in at 50.2%, up 2.5 percentage points, but yarn and fabric sales volume indices were only 47.7% and 48.8%, both in contraction. Representative 32-count pure cotton combed yarn averaged 23,739 RMB/ton, up 4.62%; pure cotton grey fabric averaged 7.43 RMB/meter, up 7.35%. Price increases failed to drive volume, intensifying price negotiations along the supply chain.
Business Confidence: Fragile Recovery, Caution Prevails
The business operation index stood at 50.0%, exactly at the threshold. Revenue index was 49.3% (contraction), while profit index was 50.7% (expansion), indicating that firms still benefited from lower-cost raw material inventories. This "volume down, profit up" pattern is unsustainable; once cheap stocks are exhausted, margins will face greater pressure.
The confidence index rose 2.7 percentage points to 49.4%, still below the boom-bust line. The industry broadly expects the off-season to persist, with order weakening and sales slowing, keeping sentiment cautious.