China's cotton textile industry recorded a set of contradictory signals in May 2026. The sector's prosperity index slipped below the boom-bust line, yet production and product prices showed an upward trend against the tide. Behind this lies the divergence in raw material costs, weak downstream demand, and enterprises' accelerated inventory strategy adjustments during the traditional off-season.
Prosperity Downturn vs. Production Expansion
According to data from the National Bureau of Statistics and industry monitoring, the cotton textile prosperity index in May stood at 49.9%, down 0.1 percentage points from April, falling below the 50% threshold for the first time in two months. The traditional off-season effect began to show, but production did not contract simultaneously—the production index rose to 50.3%, up 0.9 percentage points month-on-month. This anomaly is explained by both yarn and fabric output indices entering expansion territory: the yarn output index was 50.1%, and the fabric output index stood at 51.4%, both above the boom-bust line.
This indicates that factories did not voluntarily cut output at the beginning of the off-season but rather worked through earlier orders and raw material inventories. The equipment operating rate index was 49.5%, still below the threshold, suggesting that capacity utilization did not fully recover alongside output increases, with some enterprises likely relying on overtime or product mix adjustments to maintain production.
Raw Material Price Divergence: Cotton High, Chemical Fibers Under Pressure
May saw clear divergence across raw material markets. For cotton, the main CF2609 contract hit a year-to-date high of 16,955 yuan/ton on the first day after the Labor Day holiday before retreating sharply, bottoming out at 15,855 yuan/ton by month-end—a drop of over 6%. However, the monthly average price remained elevated, with domestic 3128-grade cotton spot averaging 17,373 yuan/ton, up 504 yuan/ton or 2.99% month-on-month.
Chemical fiber prices moved in the opposite direction. Influenced by volatile international oil prices and US-Iran negotiations, polyester staple fiber prices fell from around 8,400 yuan/ton to the 7,700-7,800 yuan/ton range, with the monthly average down 1.83%. Viscose staple fiber remained firm, with factory quotes edging up; the monthly average was 14,035 yuan/ton, up 2.37% month-on-month, but transaction volumes did not expand significantly due to ample downstream inventory.
This price divergence directly affected enterprise procurement strategies. The cotton procurement index plunged to 47.3%, down 6.5 percentage points month-on-month, indicating spinners' reluctance to buy high-priced cotton. The non-cotton fiber procurement index stayed at 50.0%, essentially flat. Inventory data confirmed this trend: the cotton inventory index was 46.9%, down 5.5 percentage points, while the non-cotton fiber inventory index rose to 50.6%, up 1.4 percentage points. Enterprises are actively reducing cotton inventory to hedge against price correction risks while moderately replenishing chemical fiber stocks.
Price Transmission Blocked: Yarn and Fabric Price Hikes Fail to Boost Sales
The product sales side showed a classic 'volume-price decoupling.' In May, the average price of 32-count pure cotton combed yarn rose to 23,739 yuan/ton, up 4.62% month-on-month; the average price of pure cotton grey fabric rose to 7.43 yuan/meter, up 7.35%. However, the price increases did not drive sales volumes—the yarn sales index was only 47.7%, down 0.8 percentage points; the fabric sales index was 48.8%, up 2.1 percentage points but still below the boom-bust line.
Downstream buyers showed significantly lower acceptance of high-priced raw materials, maintaining only just-in-time procurement. This led to rapid product inventory accumulation: the product inventory index fell to 48.0%, down 3.2 percentage points, with the yarn inventory index at 48.7% and fabric inventory index at 46.8%, both below the threshold, indicating rising stock levels.
Enterprise operations presented a complex picture. The revenue index was 49.3%, still below the threshold, but the profit index was 50.7%, above the boom-bust line. Companies leveraged earlier low-cost raw material inventories to achieve profit improvement during the price rise, but this 'dividend' is temporary. As low-cost inventory is consumed, profit margins will face increasing pressure.
Confidence Recovery from Low Base, but Off-Season Outlook Unchanged
The enterprise confidence index in May was 49.4%, up 2.7 percentage points month-on-month. Despite significant recovery, it remains below the threshold. The industry is generally cautious about the sustainability of the off-season, expecting orders to weaken and sales to slow in the near term.
Against the global backdrop, the JPMorgan Global Manufacturing PMI remained above 50% for the tenth consecutive month, while China's manufacturing PMI fell to the 50.0% threshold. The temperature difference between domestic and external demand persists. As an intermediate sector, the cotton textile industry must absorb upstream raw material volatility while coping with downstream order contraction, entering a phase requiring meticulous inventory and cash flow management.